Special SKI Report #96
Gold Stock Update

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Nov 27, 2011
Published Nov 28, 2011

Current USERX price = 15.91, Down $1.61 cents (9.2%) since the 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:

In the last gold stock SKI Report written on Sunday 11/06/11, I described how I had sold all of my gold stocks on 10/28/11 at USERX 17.20 due multiple SKI index resistance signals (a 16-20 index sell signal followed by an XXed Out 92-96 index “buy” signal) and a dangerous run pattern (2 Down and 8! days Up). As of that last Report (a week after I had sold), USERX had already risen slightly above 17.20. I concluded that Report with the possibility that the gold stocks could still rise to the final resistance, a 35-39 index signal (where prices rise to above the prices from 35, 35, 37, 38, and 39 trading days earlier), but I did include the un-hedged prediction that the gold stocks were supposed to decline over the subsequent three weeks to below USERX 17.20 in order to sell that 92-96 index at a loss.

Although 10/28/11 was the rebound high for the general stock market, the gold stocks continued higher on the day after I wrote that 11/06/11 Report. They formed another dangerous run pattern of 2 Down and 4 Up. The HUI index hit/touched the 35-39 index on 11/07/11 and that was the high. The gold stocks have subsequently declined approximately 11% and USERX HAS declined to below 17.20 to sell that XXed Out 92-96 index “buy” signal from 10/28/11 at a loss on a run down of 6 consecutive daily declines into last Monday (11/21/11) at USERX 16.20. The 35-39 index actually did generate that final resistance signal on 11/16/11 and the real decline began the next day. The 6 days down could have been a low on 11/17/11, but the run down wasn’t strong enough to form a clear run pattern low (i.e., the 6-day decline averaged only 1.5% down per day).

I can make this a fairly brief Report. I had previously written that this type of decline would provide another opportunity for a true SKI bull market. We do still have that opportunity, but first the market needs to make a bottom and begin to rise over the next several weeks. The SKI indices are providing multiple additional index signals that will mark several days of this coming week as “possible” lows, but a further decline or a failure to rise 2% over the next week will yield index signals that will then XX Out any new buy signals on the next rise. The index pattern is not currently conducive to obtaining a true bull market buy signal, but it is still possible if this week goes well. Jeff doubts that it will, but we’ll see. SKI and Jeff remain in cash, looking to “call” the next low, but probably more proficient at calling the next high if prices rebound for a few weeks. As I reiterated to subscribers this weekend:

Many writers appear to be “cheerleaders”, almost always predicting a great rise. I’ll never be like that and in fact, I can be inappropriately/incorrectly bearish. I do not yet know if the gold stocks will bottom this week on a further decline, or will just continue down, but I do believe that, at this time, SKI can provide a very good “read” of the next high. And I WILL continue to be a cheerleader for the very long-term bullish case as long as USERX does not manifest a Death Run top. At the 2008 Life Run low, I guessed at very long-term targets like USERX 67 and 100.

Best Wishes,

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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