SKI Gold Stock Prediction

presented by Jeffrey Kern, Ph.D.

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November 2nd, 2004

Archived SKI Update
More About This Trade

Monday’s (11/1/04) small drop in gold stocks (USERX falling under 8.01 as per this weekend’s Update) generated the 15-19 index buy signal for today’s (11/2/04) close. People are supposed to be selling heavily into such a buy signal and they did, as the gold stocks fell today. Today’s fall to USERX 7.75 generated the 16-20 index AND the new composite index buy signals for tomorrow’s close. Remember that these three short-term indices will yield very similar results, but over the past 30 years, the 16-20 index slightly outperforms the 15-19 index and my relatively new (this year’s research hypothesis that held true) composite index (the average of the 15-19 and 16-20 indices) handily beats them both! Therefore, the odds favor another drop tomorrow into the 16-20 and composite buy signals. However, that does not have to happen because USERX held one penny! above the critical 7.74 cited in the last Update. The gold stocks could be forming a perfectly symmetrical contracting triangle (8.30 high, 7.74 low, 8.29 high, 7.75 low today). If prices decline tomorrow they are going to plunge. If prices hold tomorrow, the triangle looks accurate.

Traditional technical (chart) analysis suggests that if prices fall through 7.74, people will be buying at USERX 7.37. Look for a fall to almost exactly that area tomorrow or Thursday. My prior Updates highlighting the run analysis and 218-222 index top at 8.30 have now been definitively proven to be correct.

Although the buy signals for tomorrow are “only” correct 80% of the time, this one looks good based upon the fact that I have repeatedly stated that readers can remain long until the 35-39 index (the system’s true path) sells (after having bought at 6.70 on 9/17/04) and that such a sell WILL come at a substantial profit. The 35-39 index’s back prices are still at 6.70. If prices were to fall through the current 16-20 index buy signal, they will end up selling the 35-39 index at a loss or at no profit. That is not supposed to happen, it makes no sense. Therefore, prices must hold and rise here (either at 7.75 today or on a plunge to 7.37) so that the 35-39 index will sell out at another top in exactly 20 trading days (one month plus or minus one day).

This is just a small buy signal and it’s off the path. The world will not end and the gold stocks are unlikely to skyrocket forever. If prices hold at the index buy signal (7.75) we’ll get a little rise for a week into a sell and then probably a fall into another little buy as the triangle contracts for weeks and prices stay generally flat. If the plunge to 7.37 occurs tomorrow, the indices predict a gradual rise back to slightly below USERX 8.01 over 20 trading days (+/- one day). Hence the profit on that trade might be 7-8% over the next month, depending upon the buy-in price tomorrow. You won’t like this next statement, but at that time, it is very likely that the 16-20 index sell will be accompanied by the 35-39 index sell! Look forward 20 trading days from tomorrow, go back 35-39 days and what do you see? The 35-39 index back prices will be the 8.01-8.30 high! Furthermore, go back 218-222 days from one month from now and where will the 218-222 index back prices (resistance) be? 8.01!! It looks psychologically perfect!! (But be wary when I start talking about future perfection until it actually plays out).

I sold some yesterday for a 2 penny loss and will be 100% long at tomorrow’s close if prices approach 7.37 (another 5% down). The run pattern, if we go down tomorrow will be 1 Up and 3 Down. That’s not a good run to buy on (it’s usually bearish), BUT if we fail to hit 7.37 tomorrow we’ll go down more on Thursday (and the index will have bought 1 day early) to form a nice 1 Up and 4 Down bottom hitting near 7.37 and I’ll buy then. BOTTOM LINE: BUY AT THE CLOSE WITHIN THE NEXT TWO DAYS.

I sent this alert to anyone who has asked to be on the alert list. If you didn’t get this message via email or wish to be added to the list, email me at and be patient.

How Did This Trade Work Out?

September '04 to December '04

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

Sep 17 04

Add Long, renewed Buy
Nov 03 04
Sell Signal

Dec 21 04

Nov 15 04
$1.36 $1.86

Jeff recommended to exit this trade a month early... a great move! Still, the Ski system was a winner. Here are the orginal SKI Updates for this trade:

  » Double Buy Signal
     Sep 16 04

  » Renewed Buy
     Nov 02 04

  » Alert: Jeff Sells
     Nov 21 04

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