Special SKI Report #172
Gold Stock Update: Bullishness

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday Jul 10, 2016
Published Jul 11, 2016

Current USERX price = 10.14, Up another $1.31 (15%) since the last report 3 weeks ago.

Introduction (repeated from prior Reports):

The SKI indices contain short-term (16-20 trading days), intermediate-term (35-39 trading days), and long-term (92-96 trading days) indices. A more comprehensive description of these mathematical indices and their history is found here. Basically, the indices compare today's price to prices from a specified prior time period. The name of the index specifies the time period (e.g., 92-96 index = compare today's price to prices from 96, 95, 94, 93, and 92 trading days earlier). Although I use the oldest gold mutual fund, USERX, for analyses, the predictions are applicable to the broad precious metals' market. I do not recommend or analyze specific stocks, but my subscribers from around the world regularly discuss individual issues on our Forum. In addition to the truly unique SKI indices, I also use "run patterns" to guesstimate turning points in the precious metals' market. A "run" refers to a pattern of daily up and down market closing prices. If the market has 3 consecutive days of higher closing prices, the run is "3 up". If prices then decline for 2 consecutive days, the run becomes "3 up and 2 down". If prices then close higher the next day, the run changes to "2 down and 1 up". Some people have referred to run patterns as "worms". A run pattern is only completed after the direction of closing prices has changed. I have compiled a listing of every run pattern that has ever occurred and generated probabilities that the end of the run marks a high or a low, moderated by the indices themselves.

New Material

The last SKI Report, written on Sunday 6/19/16, voiced caution regarding a possible further decline in the gold stocks: USERX and the HUI had risen into short-term (16-20 index) and long-term (660-664 index) sell signals on 6/08/16-6/10/16 and we had done some selling to reduce the size of the long positions.

Those resistance index signals did yield an immediate decline in the days after that SKI Report was written, with USERX dropping from 8.83 to 8.65. That was only a 2% decline, but USERX was within 2% of activating an objective sell-stop (for more bearishness) going into Britain’s vote on 6/24/16 to determine its status in the European Union (“Brexit”).

Since SKI is a pure technical (mathematical) system, I usually write the standard technician’s belief that the fundamentals are forecast by the technical situation. However, that Brexit vote was completely unpredictable to me and SKI was close to activating its objective sell-stop. Nonetheless, when selling was performed on 6/13/16 at USERX 8.87, the objective buy-stop was a rise to over the resistance index signals from 6/08/16-6/10/16 into a new 2016 high over USERX 9.08.

Interestingly, when gold rose almost $100 immediately after the Brexit vote, the HUI closed at a new 2016 high but USERX only rose back to 9.00, so bearishness was still feasible. As USERX closed at 9.03 on 6/29/16, thereby approaching 9.08, an Intra-Week Update was sent with instructions to buy if USERX was rising over 9.08 during the subsequent 2 trading days. USERX was clearly rising over 9.08 the next day, so the buy-back was activated and Jeff re-bought at 9.17 on 6/30/16.

If you recall, the HUI’s 663 index had marked each resistance level in 2016 and initiated a decline. The HUI (and of-course, USERX) had finally broken through that resistance index in a bullish manner. When this bull market began in January 2016, I had written that, based upon the history of prior SKI bull markets, USERX should at least double within 6 – 12 months. It’s been 5.75 months and USERX has now risen 103% from the 92-96 index’s buy signal.

Conclusion

Although the master 92-96 index had marked the start of this bull market just 3 trading days after the January 2016 low, and the 16-20 index’s buy signals had marked the exact corrective lows on 4/04/16 and 5/27/16, the last SKI Report concluded with the warning that “This continuous string of SKI-perfection during 2016 won’t continue indefinitely”.

That turned out to be a timely warning because the resistance sell signals reported in the 6/19/16 public SKI Report were bullishly broken to the upside after the Brexit vote, and SKI did NOT mark the low just prior to that fundamental event. Nonetheless, the breakout to new 2016 highs (over 9.08) was the new buy-stop, so Jeff re-bought on 6/30/16 at USERX 9.17. That cost me (us) 3+% in lost profits, but I’d likely execute in the same manner if such index signals were to ever occur again.

The subsequent immediate and powerful rise validated a continuing bullish situation: The rise to new 2016 highs has overcome ALL SKI index resistances for USERX and the HUI! There isn’t any new prediction unless the new sell-stop is activated (not expected) during the next 2 weeks. In 2-3 weeks, the 16-20 index will be rising to current price levels and we’ll see what’s happening at that time.

My always frank/honest advertising statement is that there isn’t a need to subscribe to SKI during the next 2 weeks unless there is an unexpectedly harsh decline, but I would suggest subscribing (smile) prior to the next 321gold SKI Report in 3 weeks.

Cheers, Jeff

If you are interested in following and learning more about the SKI indices, I'll write another Report in three weeks or you can shell out the big bucks for a SKI subscription. Weekly Updates are available by subscribing for a month (or longer if you're wise and cheap enough to want to save money) at my website www.skigoldstocks.com for the princely sum of $25 (for a one month subscription) or more ($200 for an annual subscription). I also provide more frequent intra-week messages/alerts at a slightly higher price along with access to our informative Forum and a managed gold futures program. The precious metals are in a very long-term (decade+) up-trend but are the most precarious, volatile, and psychologically difficult market in the world (in my opinion). That's the way it's always been.

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email: jeff@skigoldstocks.com

Jeffrey M. Kern,Ph.D., is an academic psychologist with a specialty in the measurement and prediction of human behavior. The communications provided are for informational purposes only and are not intended to be investment advice or recommendations for specific investment decisions. Dr. Kern is not a registered investment advisor, but is registered as a commodity trading advisor (CTA). The information provided is considered accurate, but cannot be guaranteed. Investments/trading in narrow market segments or gold futures is for individuals willing to accept a higher level of risk for the opportunity of greater returns. Past performance is no guarantee of future performance. His website is www.skigoldstocks.com.

Communications should be sent to: jeff@skigoldstocks.com.

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