SKI Gold Stock Prediction

presented by Jeffrey Kern, Ph.D.

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December 4th, 2003

Archived SKI Alert
More About This Trade

Since this last weekend’s Update (11/29/03), gold stocks continued up on Monday and Tuesday, with USERX (the gold mutual fund) climbing another 20 cents on Monday and 8 cents on Tuesday to close at 9.37 (and yielding a salivating 25% profit over the past 5 weeks of this trade). Therefore, the run pattern extended from the weekend’s 3 days down and 3 days up to 3 days down and 5 days up. As stated that weekend, if the run extended much further while averaging 3% up per day, a major top would be in place. Any run (i.e., consecutive days in one direction) beyond 5 is very unusual. Perhaps we (current bulls) should be glad that the run stopped at five, averaging 2.5% per day.

Extended runs in physical gold (CASH COMEX gold) are even rarer than runs in the gold stocks. I believe that gold was higher for four consecutive trading days on Tuesday (note that on 11/25/03 the futures price of gold closed down about 40 cents, but cash actually and unusually closed UP), so that when gold closed up yesterday (12/3), we had a 5 day run up in gold! The odds were extremely high that gold would decline the next day (Thursday, 12/4) so SKI sold some at the last minute (9.29). It wasn’t possible for me to write or send an alert on such a split-second observation for a short-term transaction: I was unpleasantly stunned when I got back from class and saw that gold had closed UP 30 cents for the day!

So today the gold stocks took a hard drop while gold closed down a paltry 60 cents. Thank G-d that gold closed down to stop that run! If it had closed up, I’d be sending out a run-for-the-hills alert after 6 consecutive days up. USERX, continuing to lead the league in volatility, fell over 3% today to 8.98. SKI re-bought the shares sold yesterday (saving/profiting 3%) and my fast-triggered colleague bought back the shares that he had sold at 9.09 last Friday (netting 1% savings). The timers remain long (scary).

I was getting excited this weekend and now I’m getting even more nervous. The time period for a high is rapidly approaching. It would be okay if USERX fell another 31 cents to 8.68, testing the prior high at 8.67. The run pattern is useful here: The completed 3 down and 5 up run CAN mark a major high, but the probability is only about 40%. So if we just continue to fall now, I will be out on a rebound up. IF we go 4 or more days down (another 2 or more days down) that will mark a low and I’ll sell after a few days up. The most bearish pattern would be established if we go down tomorrow for a third day down AND then go up. Five days up and 3 days down is a very bearish run and I’ll sell after one or two days up.

However, I am expecting that the up-trend will continue tomorrow (that’s obviously why I re-bought today). IF we go up tomorrow, the bullish run patterns will continue. Note that IF USERX goes up tomorrow and goes on an extended surging run up (5 or more days at more than 2% per day), I’ll send out alerts for a major sell pattern.

My guarded optimism is partially based upon my review of some individual gold stocks (I do this when I get nervous and am looking for additional confirmations/ideas). For example, look at a chart of ASA. Today’s down move just barely/perfectly closed an existing up gap from a week ago while leaving a down gap that begs to be filled!

Therefore, in conclusion, it is certainly possible that the 3 down and 5 up run, to USERX 9.37, marked a major high. I am ready to take the profits. However, the odds continue to favor at least one or more surges to the upside. It is time for SKI to start the deep-breathing, anxiety-reduction routine and for the gold stocks to go up again. Best wishes.

Lastly, I rarely comment on politics, but the SEC’s new proposals for mutual funds are very upsetting. Their plans are to require short-term trading fees and that buy/sell orders must be given hours before the market closes. This will be a severe punishment to me and other “small” investors. In order to prevent criminal activity they are planning to limit the rights of and punish small investors. No new rules are needed: Just send the people who are criminals to jail and police the mutual funds! I don’t have the link yet, but I’d ask readers to contact the SEC or their Congressman to prevent these new rules from being instituted. The proposed rules simply restrict the rights of small investors in order to prevent criminal activity. We didn’t do anything wrong, don’t punish us! If I buy and then need to sell quickly to limit the loss, I shouldn’t be penalized by having to sell early in the day (before I know if I really have to sell to limit the loss) and by having to pay a mandatory short-term trading fee that enriches the mutual fund just because I am supposed to limit my losses! SKI is rarely mad, but this is crapola!

How Did This Trade Work Out?

July '03 to January '04

SKI BUY SIGNAL SKI SELL SIGNAL Jeff Sold SKI Gain/Loss Jeff's Gain/Loss
Major Double Buy

Jul 23 03

Jeff Buys More

Jul 30 03

Add long, renewed buy

Oct 06 03

Sell Signal - MARKS HIGH

Jan 08 04

Dec 12 03
$3.48 $3.86

On this particular trade, the SKI system accurately predicted a Major High in the Gold Complex. Again, Jeff's Special Alerts were invaluable as he saw the signal coming almost a month in advance and was able to exit with even greater profits.

  » Buy Signal
     Jul 23 003

  » Renewed Buy
     Jul 30 03

  » Alert: Major High
     Dec 04 03

  » Alert: Jeff Sells
     Dec 09 03

  » Sell Signal
     Jan 07 04

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