 Special SKI Report #30
Gold Stocks: Patience or Patients?
Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX
| historicals
Written Dec 15, 2007
Published Dec 17, 2007
Current USERX price = 17.77,
Down another 7.5% since the last report 3 weeks ago.
Introduction (repeated from prior Reports):
I have been using my unique
SKI indices to predict price changes in the precious metals'
market for more than two decades. And my indices continue to
mark the critical points. I have initiated a subscription website
since 1/13/06 (yes, Friday the 13th) after having posted free
updates for years at the most informative gold site, 321gold,
since its inception approximately six years ago. SKI is a timing
service; although almost everyone seems to believe that market
timing is impossible, that IS what the SKI indices have done
for 32 years.
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 at http://www.skigoldstocks.com/about.php.
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 on 11/25/07, I described how after missing
the powerful rise from the August 2007 low, patience was paying
off by waiting for the likely decline after the rise was completed:
The gold stocks had retreated back to the initial SKI index.
That 16-20 index had executed its buy signal on 11/16/07 at
USERX 18.72 and its "sibling" index, the 15-19 index,
had executed its short-term buy signal the next day, on 11/19/07
at USERX 18.21. Those short-term SKI indices were showing that
Time X Price had yielded the first level of price support and
indeed, that did mark a short-term low point to within a day
(for the 16-20 index) and to the exact day (for the 15-19 index).
And yet, I also wrote in bold-faced
type, that I HAD NOT BOUGHT due to several factors, but primarily
due to risk management and the fact that historically, the gold
stocks don't start their next major rise until they have retreated
back to the intermediate-term 35-39 day index. And thankfully,
that IS what happened next: After prices rose a few percent
and then basically held flat for about two weeks after the short-term
index buy signals, the gold stocks fell again to generate that
35-39 index signal that is supposed to mark the next Time X Price
point of support. The 35-39 index generated on the exact day
of that next low, slightly below the price of the prior low (as
it should), on 12/05/07 at USERX 18.20, and executed the next
day (12/06/07) at USERX 18.48. SO SKI "WAS BACK" IN
PLAY EVEN MORE THAN IN THAT LAST REPORT, and Jeff (that's me)
was happier!
Did I buy that signal? STILL NO. Why not? During SKI bull
markets, a decline to below the prices from 35-39 trading days
earlier usually marks an intermediate-term low and I would be
saying, "Buy". But if you've been reading these Updates
for 321gold over the past months, or really over the past 1.5
years, you know that despite the fabulous rise off of the August
2007 low, the SKI index patterns and the run patterns have not
been appropriate for a true bull market. The one factor that
did argue (and still does argue) for a POSSIBLE bull market (ala
mid 2005 to mid 2006) is that the SKI system path of indices
IS on a 92-96 index buy signal that executed on 9/11/07 at USERX
16.15. Such an index signal is required for a bull market, but
does not guarantee that there is a true bull market (where prices
double or triple over a year).
Therefore, since I was skeptical
that this was (and is) a true bull market, I had to continue
to utilize appropriate risk management (i.e., not taking a chance
on losing a significant amount of money), and wait for the next
intermediate-term SKI index buy signal. Then I would have a
rather good stop-loss point. So I still sat in cash, waiting
to see if the market would hold those two levels of support marked
by the 16-20 index and the 35-39 index signals. The wonderful
aspect of getting that 35-39 index sell signal on 12/06/07, was
THAT SKI WAS THEN SET UP TO MAKE ME BUY A NEW 35-39 INDEX BUY
SIGNAL, so I didn't really have to worry any more about missing
most of the next great rise, if it was going to occur (as prices
rise back over the prices from 35-39 trading days earlier).
During the great bull market surges of the late 1970s, such a
35-39 index buy signal often took about 39 trading days. Currently,
the next 35-39 index buy signal MUST be generated within 39 trading
days of 12/06/07 IF the rise off of the August 2007 low was the
start of a true bull market.
This past week the gold stocks tried to rally during
the early part of the week. On Monday (12/10/07), USERX rose
back up to 18.72 and touched the 16-20 index. Since that index
had bought the decline several weeks earlier, a rise into that
index represents resistance and moves the index closer to a sell
signal (It buys declines and sells rises). But on Tuesday (12/11/07),
the market declined subsequent to the Federal Reserve announcement.
In SKI terms, the goldies had risen into resistance on Monday
and had been repelled. On Wednesday (12/12/07), the gold stocks
rose again to hit the 16-20 index once more and more importantly,
prices also hit the 35-39 index. A critical juncture was indicated
because if prices had continued to rise for a few more days,
a new 35-39 index buy signal would have been generated and I
would have been buying. The decline at the end of the week
was rather bearish as prices appear to have been firmly rejected
from the index resistance and actually fell below the earlier
index support signals.
The next SKI signal of importance
HAS to be (mathematically), either a new 35-39 index buy signal
that is to be bought OR a 92-96 index sell signal that will confirm
that the rise from August 2007 was not a true bull market. The smaller precious metals stocks
have performed rather poorly in 2007 and did not rise very much
off of the August 2007 low. And even though many gold indices
and USERX rose to new century highs in November, they have not
performed well relative to gold bullion, which sits near $800
an ounce. In the U.S., the gold stocks have been affected as
much by the general stock market as by the precious metal itself.
It appears that general "risk aversion" has held back
many of the gold stocks.
Personal: On the personal side, 2007 was a
rather difficult year for me. I've only made about 10% timing
the gold stocks, I missed the rise from the August low, and most
importantly, my wife experienced severe cervical stenosis. Despite
surgery (screwing multiple titanium plates into her neck), cortisone
shots, physical therapy, acupressure and massage, she continues
to be disabled and in pain. And she also has multiple severely
compressed discs in her back that are waiting to be addressed.
So I'll be glad when this year is over! 2005-2006 was a banner
year and good years tend to be followed by mediocre or bad years
(so don't get too happy when you have a great year and vice versa
[smile]!)
I hope that your 2007 was better
than mine and wish you a warm holiday season, a bright new year,
and a massive SKI buy signal in 2008. I almost forgot. The
prognostication for 2008 is that USERX will experience a
significant decline into a "life run" pattern low (that
will reverse the "death run" pattern high of May 2006)
and that I'll be buying one day after that low, make a fortune,
and buy my wife a new cervical AND lumbar spine...
If you are interested in following
and learning more about the SKI indices, I'll write another Report
for 321gold 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.
Best wishes for happiness,
health, and prosperity, Jeffski
 SKI archives
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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