SKI Gold Stock Prediction

presented by Jeffrey Kern, Ph.D.

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December 9th, 2003

Archived SKI Alert
More About This Trade

Since last Thursday’s Update (12/4/03; USERX = 8.98), the gold stocks had a nice little key reversal up day on Friday (starting down and then closing up) with USERX rising to 9.20. I was pretty excited this weekend; my wife told the kids over the phone that I was smiling almost everywhere I went. I wasn’t singing in the car, but was doing a little humming and planning on singing my own version of the song, “You’re in the money, honey” when the gold stocks made a large run up into a high this week.

On Monday, the gold stocks closed slightly down (USERX=9.15) while gold moved higher again. I was very disappointed by Monday’s movement after having expected a nice up move and receiving a poor performance while gold actually closed higher for the day. I wanted to sell, but didn’t.

Today, on Tuesday, gold again moved higher (for the third straight day) but the gold stocks were trending down. USERX looked like it was down about 1.5% when I decided that I’d just better take the profits. So I gave my sell order and sent out a brief email to readers on my email list to say that I had decided to sell. Our little gold stocks then began to fall quick precipitously, with USERX ending down over 3% at 8.86. What a miserable day to sell. The trade from 6.43 netted about 37%.

I may have capitulated and sold too soon, right before the big run up (starting tomorrow? Remember I am pretty good at selling at lows). Actually tomorrow seems to be a very important day because another down day would yield a fairly bearish run pattern of 1 up and 3 down (currently 1 up and 2 down). For months now, anytime that the market has reached this sort of critical juncture, it has resolved to the upside (as it did, as expected, last Friday), so the nice bullish case needs an up day tomorrow. It remains possible that the run into last Tuesday’s 9.37 (3 down and 5 up) could have been an important high. I stated those odds as only 40%, but those odds combined with the gold stocks’ severe underperformance relative to gold the last two days were enough to make me take the profits. If USERX begins a rise tomorrow, I’ll feel like a stupid chicken for not having waited to sell until the third down day actually occurred, but I will have completed a nice winning transaction nonetheless.

My colleague remains long after having bought back at 8.98 last Thursday. Remember his typical pattern that I presented a week or two ago: He often completes 11 or 12 consecutive winning trades over a year, partly because he’ll sit through little losses and only sell when he’s back at a profit, but then he’ll get hit with a fairly large loss as he sits waiting for prices to recover, but prices stay down. I think the last winning trade was his twelfth, so I’m hoping that history does not repeat itself (again) now.

The system path remains on the 35-39 index buy signal (and powerful double buy signal) from 7/23/03 at 5.43. Investors can still simply continue to follow that signal until it sells after some moderate decline. The 35-39 index back prices are rising up to the 7.44 area from 39 trading days ago. The 16-20 index back prices will be rising up to 8.62 by this Thursday! This means that if prices fall now, they will begin to hit that 16-20 index support. This 16-20 index signal (IF it occurs) would be the second one inside the 35-39 index buy signal. The second one usually is NOT profitable, meaning that prices eventually fall down to the 35-39 index sell signal. Therefore, the close index stop, if I was still long, would be the next 16-20 index signal.

It’s unlikely that I’ll be able to recommend another gold stock buy until after a fairly substantial decline (at least 20%), whether that decline comes now or from 10X higher than this (I already have seller’s remorse). I don’t have any safe way of re-entering on the long side if prices keep rising. The current rise (since March/April) has been going on for a very long time. This week was the general time period that I had expected to sell, but that time period extended out until Christmas. I am not predicting that prices have topped out here because I have not gotten a nice clear topping pattern. But I do know (and you’ll think I’m stupid for staying with this) that my system’s path missed being on a true primary bull market signal by one day this past Summer. Therefore, prices are simply not supposed to keep going up here for another long period of time before a major drop commences, even if it is from yet higher prices in the short-term. Best wishes.

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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