Special SKI Report #43
The GREAT SKI Puke Bottom

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sep 17, 2008 Gold is up $85 today!
Published Sep 18, 2008

Current USERX price = 12.36, Down another 9.2% since the last report 3.5 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:

NOTE THAT I HAD TO PURPOSELY DELAY THIS UPDATE FOR SEVERAL DAYS for the first time in many years), because the great SKI low had been obtained last week and I needed to let subscribers finish buying before publishing this "free" Update. The $85 gold rise today caused me to allow subscribers (and Jeff) to publish that the 2.5 year SKI bearishness had ended on the gold stock multi-year low last week because SKIers were supposed to be "all in" with leverage due to the 5th historical bottom in the past 35 years.

In the last gold stock SKI Report on 8/23/08, titled "Gold Stock Bottom??"; And NOTE the 2 question marks), I wrote (implied) that the final bottom awaited:

"Conclusion: The next critical psychological/technical point for SKI will probably occur towards the end of this coming week and more likely, immediately after the 3-day Labor Day weekend. Historically, prices tend to rise after Labor Day, but that seasonal tendency is only accurate about 67% over many years. The other 33% of the years, the gold stocks decline. The 90% probability is that the gold stocks will move rather strongly in one direction for one month after the Labor Day weekend. Again, I only use such data as background information. IF THE 16-20 INDEX SIGNAL IS GENERATED, THE DOWNTREND IS ENDING. But even if that happens, I can't predict some great long-term explosion: Since May 2006 the run pattern has predicted a final wash-out low that still has not been achieved.

AND THEN: On Sunday (9/07/08), I emailed my gold futures broker to expect the great buy on Wednesday (9/10/08), Thursday, or Friday. I wrote to readers on 9/09/09:

"SKI Intra-Week Update #1 9/09/08 4 PM PST
USERX = 11.09, Down a "mere" 78 cents (i.e., PLUNGE)
The 7-day run down from 13.7 to 11.09 is now averaging 2.72% per day. Therefore, ALL LIFE RUN CONDITIONS ARE BEING MET. I repeat, ALL great life run conditions are being met.

Death (runs) Lead to Life (runs): That's Nature

This is NOT yet a buy Update as we await either the first day up (and an Intra-Week Update #2 Buy Update at 11:30 AM PST) or take some risk and buy the 663 index buy signal that WILL be generated tomorrow (9/10/08) and execute on 9/11/08's close. You ARE allowed to buy on 9/11/08's CLOSE even if we do not yet have the first UP close on that 663 index buy signal. Perhaps prices will rise on 9/11/08 such that the index buy signal and the first up day will coincide. IT DOES NOT MATTER as long as you buy the first up day and/or the 663 index buy signal. I will Update to everyone as I buy.

I am writing this brief Update to try and prepare your mentally/emotionally for a disciplined buy. This IS the way that it IS supposed to be. I must take risk AND THIS FITS ALL CRITERIA FOR THE FIFTH GREAT LIFE RUN LOW IN THE PAST 35 YEARS. THIS IS SUPPOSED TO BE THE SECOND GREAT BUY ON THIS DECADE/CENTURY.

I've previously written how the life run low might contain a day when all gold indices closed higher but USERX mysteriously closed lower, "just to provide some suspense". That occurred last Friday (9/05/08) and my eyes opened wide and I began to move all monies into firing/buying position. I have written how all traditional technical indicators would get "destroyed" during a life run and you have now seen all ratio measures go to incomprehensible lows, trend lines get pulverized, etc.. AND WE MAY NOT BE DONE YET. Those things do not matter. IT IS AS IT SHOULD BE. Those measures are based upon price. Too simple. It is ALWAYS Time X Price that matters and time is more important than price. WE ARE ALMOST THERE. The 663 index is about to buy and the life run pattern is almost complete.

I've also written that most life runs are accompanied by a severe general stock market decline. That is not required, but it would be wonderful to see a large market collapse starting today. I've written how life run bottoms are often accompanied by Federal Reserve and government intervention to stem the stock market decline. I am not predicting anything here, but I would love to see it and then an unexpected Federal Reserve interest rate cut SOON (meeting on 9/16/08).

Gold bullion is also down for 7 consecutive days, but its decline has still been muted. We want a collapse NOW. Target at least $730 basis cash gold. I believe that the record is nine days down, so time is almost up because gold is also down for 7 consecutive days. NOW.

Note that Jeff has written for a month that he is planning to buy Krugerrands at the bottom. I never buy any insurance. I am self-insured. I have never owned physical gold. I have warned for a year regarding financial system "concerns". THE FACT THAT JEFF IS ABOUT TO BUY GOLD COINS (for 6 months living costs) SHOULD SPEAK LOUDLY REGARDING MY CONCERNS.

My very conservative 75-year-old colleague is going 100% long and actually is going longer than ever before, as his cash reserve will only be $3K! He is going "All in" more than ever before (never any leverage, just USERX).

Diatribing, Jeffski

P.S. Again, I hate risk but I MUST make the biggest "bet" of my life. I will have all monies in gold stocks, physical gold, and I-bonds, almost nothing in cash or in banks. It IS a "bet", but the probability is supposed to be 99% (never previously wrong). Oh my! I really hate this ****** world situation but I don't have any power. No one does. IMO, it's nature's course...."

Conclusion:

Folks were puking on the SKI Forum at the great low and "we" were supposed to buy in a large manner. But the bottom line is that if you didn't sell with over the past two years, you couldn't buy the great bottom. Folks who try to time their SKI readership to the market have a particularly difficult task: They have to time the market AND they have to "time the timer". I told you how I missed the August 2007 bottom because IT WAS NOT "SKI-CORRECT". But I've been on fire since February 2008, got the exact high in March 2008, several other lows and highs in 2008, AND the 2008 low last week to within a day as I always "promise". The next attainable goal is for the SKI indices to call the next intermediate-term high. I waited 2.5 years to buy the low for this move. I've made money over that time. But the whole goal is to be in cash or be short into the great bottom SO THAT YOU CAN BE A BUYSKI!

Best wishes,

Jeffski

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. 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.

Copyright © 2002-2024 Jeffrey Kern. All Rights Reserved.

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