Special SKI Report #130
Gold Stock Armageddon

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Dec 8, 2013
Published Dec 9, 2013

Current USERX price = 5.73, Down 89 cents (13.4%) 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 gold stock SKI Report, written on Sunday 11/17/13, described how the gold stocks (USERX) had just executed a 16-20 index oversold buy signal AND a simultaneous 92-96 index sell signal. If the gold stocks declined below that 16-20 index buy signal, Armageddon was predicted to initiate. But a new 92-96 index buy signal was extremely close to generating and if that buy signal occurred, SKI and Jeff would turn extremely bullish. That WAS “a SKI critical point”.

As of that Sunday (11/17/13), USERX had closed at 6.62 on Friday (11/15/13). The master 92-96 index’s back prices (the USERX prices from 92 through 96 trading days earlier) were as follows for that coming Monday (11/18/13) and Tuesday (11/19/13):

            11/18/13: 6.67, 6.56, 6.51, 6.56, 6.54
            11/19/13: 6.56, 6.51, 6.56, 6.54, 6.92

A CLOSE ABOVE 6.67 ON THAT COMING MONDAY (11/18/13) WOULD HAVE GENERATED THE BULLISH 92-96 INDEX BUY SIGNAL. FURTHERMORE, A CLOSE ABOVE 6.50 ON THAT MONDAY AND A CLOSE ABOVE 6.54 ON THAT TUESDAY WOULD ALSO HAVE GENERATED THAT BUY SIGNAL. Yes, that specific information was reserved for subscribers.

What happened? On Monday (11/18/13) gold declined $15.10 and USERX fell to close at 6.48. THAT WAS BEARISH BECAUSE THE DROP TO BELOW USERX 6.50 MADE IT EXTREMELY DIFFICULT TO GENERATE THE BUY SIGNAL: USERX HAD DECLINED TO JUST BELOW 6.50. A rise on Tuesday to above 6.56 still would have generated the important 92-96 index’s buy signal, but despite a $1.20 rise in gold on that Tuesday, and a tiny decline in the HUI/GDX, USERX kept falling and closed at 6.39.

The declines on Monday (11/18/13) and Tuesday (11/19/13) made it abundantly clear that the 92-96 index’s buy signal had been avoided (again). ARMAGEDDON HAD INITIATED EVEN BEFORE THE MARKET’S BEARISH REACTION TO THE RELEASE OF THE U.S. FEDERAL RESERVE’S MINUTES ON WEDNESDAY (11/20/13).

Conclusion

Armageddon initiated when the gold stocks declined immediately after the last SKI Report on 11/17/13. The master 92-96 index’s bullish buy signal was avoided as the SKI indices continue to mark the critical points to the day and the USERX penny. These Armageddon-type declines have clear historical precedents for their duration. It has only been 15 trading days since Armageddon began and it usually continues beyond a 15-day period (averaging about 1% per day down over the Armageddon period). SKI and Jeff remain bearish. Multi-year Life Run lows always (yes, “always”) occur during Armageddon declines, but please clearly understand that not all Armageddon declines yield a Life Run low. The SLV and GDXJ Death Run tops occurred in 2011. Jeff’s looking for a possible Life Run low to become bullish, but cannot predict that it will occur on this decline.

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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