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Introduction to the SKI Gold Stock Prediction System

Jeffrey M. Kern, Ph.D. Monday, December 31, 2001 Most gold and gold stock analyses focus on waves, cycles (time), and prices. The SKI system is a unique mathematical system that analyses the interaction of price and time. It was empirically developed in 1985 and has been cross-validated since that time using real-time data on a very broad composite of gold stocks. The goal is to predict the short (1-4 weeks), intermediate (1-2 months), and long-term (years) price fluctuations in gold stocks. Although my original gold stock composite is proprietary, U.S. GoldShares (Symbol: USERX) is used in public analyses. USERX is the oldest gold mutual fund with data available since 1974. Note that the gold stocks comprising USERX have changed dramatically many times over the past 26 years, but the system has continued to perform well. Generally, the system achieves 80% accuracy with the 20% errors involving small (1-3%) losses. This system does not trade frequently. Rather, it was designed to give high probability signals, with the probability of success being known in advance. The goal is to minimize market exposure while risking capital only when the probabilities for success are high and a close stop is provided by the system. Quite a few rises and declines are therefore "missed" by the SKI system. The system does not take into account any "fundamental" factors. It only focuses on the price by time interaction, and the velocity and acceleration of price changes at a specific time. Technical Description The system's base is composed of three indices: the 16-20 day index, the 35-39 day index, and the 92-96 day index. Three longer-term indices were also identified: the 218-222 day index, the 439-443 day index, and the 660-664 index. These indices are computed by comparing the current day's price to each of the index five back prices. For example, looking at the 16-20 index, the current price is compared to the price from 20 days ago, 19 days ago, 18 days ago, 17 days ago, and 16 days ago. If the current price is higher than the price 20 days ago, a +1 is assigned. If the current price is lower than the price 20 days ago, a -1 is assigned. If the current price is equal to the price 20 days ago, a zero is assigned. This is done for each of the 5 days comprising the index and is summed. The value for any day is therefore between -5 and +5. The index is further computed using the sum of the last 5 days of such values and is multiplied by four, yielding an index score between -100 and plus 100. Lastly, yesterday's index score is subtracted from the current day's index score, with difference divided in half and added to the current day's sum to yield the final index score for the day. When the index changes sign (i.e., from positive to negative or from negative to positive) a signal is generated for the close of the following day. This system was designed so that I could obtain buy and sell signals the day before they were to be executed. This means that one usually doesn't have to watch the market, one simply needs closing prices to generate signals to be executed for the close of the next day. The above math was based on the hypothesis that cycles exist, but the math also employs the concepts of the velocity and the acceleration of the daily price changes when compared to prior prices. Some people like to think of each index as being similar to a moving average. That is an acceptable idea, but the important difference is that the set of 5 back prices changes each day. Unlike a moving average that changes slowly, the 5 back prices can change quite dramatically from day to day! By looking at upcoming changes in the back prices, one can get a "feel" and "map" for the future of the market. Another way of viewing these indices is that they are objectively marking Elliot waves and are certainly marking critical points. The 35-39 and 92-96 indices were discovered by searching for indices which maximized profits when one bought as current prices rose over the back prices (i.e., the index sign changes from negative to positive) and vice versa. For example, when current prices rise over the back 35-39 day prices, this is termed a 3539 index "buy" signal. The 16-20 index was discovered as the best CONTRARY index. When prices rise
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over the back 16-20 day prices, this is a "sell" signal." The SKI system becomes more complex based on patterns of "buy" and "sell" signals. A "path" is established based upon which of the 3 indices is in "control". The index that buys first is in control and on the path. For example, if the 35-39 index generates a buy signal and then prices rise to the 92-96 index signal, the 35-39 index remains in control until it sells or a higher order index (i.e., the 92-96 index) sells. Bull markets occur when the 92-96 index generates a buy signal that is on the path. Excellent bear market rallies occur when both the 35-39 and the 92-96 are on sells, the market rallies into a 16-20 sell signal, and then falls to a 16-20 index buy signal. The system works best at marking tops in bear markets and bottoms during bull markets. For example, during a bear market, prices will eventually rise to give 35-39 or 92-96 index "buy" signals which will usually come within a day of marking the top of the rally. The system employs an "XXing Out" procedure to label such "buy" signals as actually marking high probability shorting points. Simply stated, when the 35-39 and 92-96 indices provide consecutive sell signals, the next 35-39 and 92-96 buy signals are XXed Out. A 16-20 buy signal is XXed Out if it immediately follows a 35-39 or 92-96 sell signal. A second aspect of market prediction involves RUN ANALYSIS. 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. These probabilities are moderated and enhanced based upon the current position of the 35-39 and 92-96 indices. For example, a "1 down, 2 up" run has a 98% probability of marking a top during an XXed out 35-39 or 92-96 "buy" signal, but has less than a 40% probability of marking a top during non-XXed out "buy" signals. I was able to go long one day after the August 1998 plunge bottom in gold stocks by noting the dramatic 2 up and 7 down run pattern. Although I have been unable to reliably apply the SKI system work to the stock and bond markets, I occasionally make predictions based upon run patterns and inter-market relationships. When my very broad basket of non-gold stocks declines for exactly five days while falling more than 1 percent per day, a buy signal is generated and vice versa. Since 1985, this rare pattern has generated the following signals: a sell signal at the market top in October 1987, a buy signal at the bottom in 1987 several weeks later, a buy in the Fall of 1990, a buy in April 2000, a sell on 9/5/00, and a buy on 9/24/2001. Bond prices and interest rates are frequently related to gold stock movements with a lag of 6 to 9 months. As gold stocks rise, interest rates will bottom (and bond prices will top) approximately 6-9 months later. Historical Overview The system generated its greatest run analysis buy signal in late August 1976 based upon a run analysis pattern involving a drop of 23% over 10 consecutive days and a fall of over 50% in 2.5 months into a USERX price of 1.13. Although prices rose slowly for years after that, the true bull market 92-96 index buy signal only occurred in March 1979 at 2.18. Prices rose to a high of 10.53 in September 1980 before generating a sell signal in December 1980 at 10.07 and a massive 92-96 sell signal in January 1981 at 7.38. During the 1974-1980 period I was a teenager to young adult, my father had lost his business and the family's small savings in the stock market decline, and I saved all my quarters only to see them eroded/destroyed by inflation. I vowed to never let this recur by learning how to predict the mass human behavior exemplified in financial markets. The system did not generate any major buy signals until late June 1982. Once again the gold stocks yielded a run analysis buy signal by plunging for 10 consecutive days, dropping 22% to USERX 2.94. A valid 92-96 buy signal occurred one month later at 4.01. Prices rose to high of 9.69 in late May 1983 and a
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92-96 sell signal occurred one week later at 8.82. A small rise in the market generated the system's first "Triple Sell" in early July 1983 at 8.93. This extremely powerful and long-term pattern occurs when prices rise to a 16-20 sell signal while simultaneously failing to rise enough to stay above the 35-39 and 92-96 indices. Although there were many short and intermediate buys and sells along the way, the next major buy signal was executed on 7/15/1986, one day before the low at 2.96. This was a 16-20 buy signal which predicted a major bear market rally. Prices rose to an XXed out 92-96 "buy" signal (not on the path) which sold the system out at an exact high of 4.76 on 9/5/86. Prices gyrated up and down until the system bought back at a higher price of 4.86 on 2/19/87 and rose to many long-term sell signals at the exact high of 7.91 on 4/14/87. The ensuing years, from 1987 to 1993 failed to yield any clear meaningful buy signals. Prices gradually declined to lows of 1.25 in November 1992 and late January 1993. Please note that although the above historical description focused on buy signals, I have personally made the greatest profits by shorting gold futures and gold stocks from the time I started in 1985 (although that was not the original motivation for developing the system). My greatest gain occurred by shorting gold at $505 on 12/14/87 and pyramiding the profits by adding shorts on every UP closing week until gold fell to $365 on 5/22/89. I personally stopped "trading" gold futures at that time so as to make life less stressful. The system generated its first bull market 92-96 buy signal in more than a decade on 3/15/93 at 1.58. Prices rose without generating a clear sell signal to 2.86 before collapsing in a classic 2 up and 5 down run, with the 5 days down yielding a drop of 18%. That run was another buy signal, but was accompanied by a 92-96 day signal on the day of the bottom at 1.85 (also an exact, to the penny, 61.8% Fibonacci retracement of the rise). Therefore, as prices rose off of that bottom, the next 92-96 buy signal was XXed out. But prices continued to rise, eventually yielding the second historical Triple Sell signal. I point this time period out because the system yielded conflicting long-term signals. Of-course, starting in 1996 the golds began another major decline, with USERX falling to 2.94 after a reverse 10:1 split (an adjusted basis of 29.4 cents). That bottom, on 8/31/98, was marked perfectly by a classic 7 day down run with prices falling 18% in 7 days. The run analysis buy signal yielded a rise to 4.48 in approximately one month and then the third Triple Sell in history on 11/27/98. Prices declined for months (with the system staying bearish into the Bank of England announcement on 5/7/99) until a clear 16-20 bear market buy signal on 7/13/99 at USERX 3.11 (.311). The system sold on a rise to the next XXed 92-96 buy signal on 8/16/99 at 3.48 (missing the high by two days). The subsequent decline XXed out the next buy signal which immediately preceded the Washington Accord, whereby gold stocks rose 20% in one day into an XXed 92-96 buy signal (a shorting point). Note that there have been several times where XXed out buy signals have been wrong in the short-term, with prices rising after the signals. The XXing Out procedure was designed to avoid losses and therefore misses some rises. Overall, gold stock prices have declined 98% from their 1980s highs, with USERX falling from 10.53 to a current split-adjusted price of .286! Recent Developments The system remained bearish during the year 2000, generating only one 16-20 buy signal in January 2000 that lead to a brief rise in early February before hitting an XXed Out 35-39 shorting signal at the exact top on 2/10/00. Gold stock prices declined into what some analysts view as THE long-term bottom in late November 2000 with USERX at 2.31. The SKI indices and the run analyses did NOT confirm that bottom and did not generate a clear buy signal until the 35-39 index bought on 4/26/01 at USERX 2.68. Prices rose for 17 trading days (as was forecast at that time) into the system's clear sell signal on 5/21/2001 at 3.23 (which was an exact 38.2% Fibonacci retracement of the decline from the 1999 high of 4.71 and the year 2000 low of 2.31). At that time I posted that "prices should decline for months to years." Prices, ofcourse, did decline into short-term buy signals on 7/9/01 and 8/8/01. The system generated a 218-222 index buy signal on that low of 2.62 on 8/8/01. This index provided a very long-term (years) bull market
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signal that I remained skeptical of because it had been so many years since such a signal and because I had never seen this long-term index buy at a low. In any case, prices continued to rise, with multiple signals, until a clear sell signal was executed by the 92-96 index on 10/1/01 at 2.82. The subsequent decline into 10/22 and rise back into 11/7/01 generated a clear 16-20 index shorting signal leading to another low on 10/21/01 at 2.61. Now comes the interesting and problematical part. As prices rose again, the 92-96 index generated a bull market buy signal on the path at 2.81 on 12/6/01. The signal was XXed Out, but I was and am concerned that the XXing Out is wrong (a 15% probability). This was the first 92-96 buy signal on the path since 1994. Prices immediately dropped for 3 days but then rose into a 35-39 index buy signal (off the path since the system was on the 92-96 index). If the XXing Out is wrong, this 35-39 signal has always yielded immediate and large price increases. In the last nine trading days, however, prices have remained flat to lower. Unfortunately, I am still betwixt and between right now, but the system says that prices should decline again due to the XXing Out. The back prices are set up properly for a non-XXed 92-96 bull market buy signal on the path if we do get the proper decline over the next two weeks. I continue to be concerned that the XXing Out is wrong and that we will get a significant rise within the next 2 weeks. Stay tuned! We are still on that 218-222 index bull market buy signal from August, but never made a "normal" long-term bottom in the gold stocks (where the run analysis is supposed to give a buy signal one day off of the major bottom). Conclusion As a professor, a scientist, and a practicing clinical psychologist specializing in the prediction of human behavior, I hope to provide an interesting and useful analysis of gold stock movements. Remember that the system is not suited to predicting the movement of any one particular gold stock. My philosophical view on gold is that eventually the price will rise and that all fiat (non-gold based) monetary systems have eventually failed. However, I rely on my system to time such occurrences and to preserve my family's assets via gold and gold stock purchases. I provide these public analyses so as to increase my own investment discipline, to demonstrate that there is some predictability to the human behavior of buying and selling gold-related investments, and perhaps, to gain some notoriety. My almost daily posts will also provide you with some insights into my emotional reactions (i.e., fear and greed, doubt and overconfidence) that impede my own ability to follow the system. I do not have anything to sell and rely on my profession and my own trading for my income. I put 100% of my risk capital into gold stocks long or short because I try not to "invest" in anything that I cannot predict with a reasonable degree of accuracy. Remember, however, that emotions and money management strategies are at least as important as any prediction system for preserving and increasing one's financial assets. The communications that Jeffrey M. Kern, Ph.D. provides 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. 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. Reproduction of any portion of this material and all subsequent postings on this site is prohibited without the express written permission of the author. Past performance is no guarantee of future performance.

Source: http://www.321gold.com/

The SKI System Triple Buy Signal: Long-term Implications for Gold Stocks
By Jeffrey M. Kern, Ph.D. posted February 7, 2003

Introduction
The SKI prediction system for gold stocks is based upon a unique mathematical formula developed in 1985. Its development was theoretically driven but empirically derived, and has been cross-validated for the past 17 years. It contains three primary indices (or waves): a short-term 16-20 day index, an intermediate-term 35-39 day index, and a long-term 92-96 day index. Briefly stated, each index is generated by comparing the current day's price to the set of five back prices comprising that index. Note that such back prices will change each day and often change dramatically during very short time periods. The 35-39 and 92-96 indices generate buy signals as current prices rise over the back prices. However, the 16-20 index is a contrary indicator: As prices rise over the prices from a month ago the index generates a sell signal. The dependent measure used herein is a gold stock mutual fund with broad international holdings, US Gold Shares (USERX), similar to the Gold Heart measure recently introduced on Gold Eagle. You can read this page for a more detailed description of the SKI system. The unique nature of this technical analysis system should provide readers with insights that are relatively independent from traditional technical indicators. I do not derive any financial gain from providing this information beyond the fact that I follow the system for almost all of my financial decisions. In fact, most of my lifetime profits have resulted from short positions in the precious metals complex. All USERX prices cited below are adjusted for the reverse ten-for-one split occurring on 7/1/98. The purpose of this invited article is to provide an alert that the SKI system generated an index pattern of major historical significance during the first week of December 2002: A "Triple Buy Signal." This "Triple Buy Signal" occurs when current prices close below the prices from the prior 16 through 20 trading days while concurrently closing higher than the prices from the prior 35 to 39 and 92 to 96 trading days. The 16-20 index buy signal occurred for the close of business on 12/02/02 at the USERX low of 3.99, the 35-39 index buy signal followed on 12/6/02 and the 92-96 index buy signal occurred on the following day, 12/9/02. This is depicted in the chart below.

Chart courtesy of Stock Charts A Triple Buy had not occurred since the beginning of the SKI data set in 1974. However, its inverse, the Triple Sell, has occurred three times in the last 28 years. The Triple Sell pattern occurs when prices rise above the prior 16-20 5

prices while concurrently failing to rise over the prior 35-39 and 92-96 back prices. This situation typically occurs when a large current month's price rise (climbing over the 16-20 index back prices) isn't large enough to stay above rapidly rising prices from 35-39 and 92-96 days earlier.

History/Data
The first Triple Sell occurred early in July 1983 with USERX at $89.30. Note that although gold had topped in the $800 range in 1980, gold stocks came close to equaling their 1980 highs (USERX $105.30) in 1983. In retrospect, that first Triple Sell marked the beginning of the generational decline in gold stocks. That triple sell signal also ended a SKI primary bull market signal generated near the 1982 lows. Primary bull market signals are 92-96 index buy signals. Although there were several excellent rallies in the ensuing years, the system never generated a Triple Buy. In fact, even a primary bull market buy signal was not obtained until 3/15/93 at USERX $15.80. Prices had declined 82% from the first Triple Sell to the next primary bull market signal over a period of ten years. The bull market commencing in 1993 was followed by the second Triple Sell in the Fall of 1994. Note that the price of gold did not reach its exact top until a little more than a year later. However, the system never gave another bull market buy signal after that Triple Sell. USERX declined approximately another 85% from the second Triple Sell to a long-term bottom (buy) pattern on the exact day of the low (8/31/98) at USERX $2.94. The 1998 bottom (buy) pattern was the equivalent of the two other great historical gold stock bottoms since 1974: The exact August 1976 USERX low of $11.30 and the exact USERX low of $29.40 in July 1982. That buy pattern had not only marked the two prior historical bottoms but also had never occurred at any other time (i.e., there were no false positives). It therefore appeared that the generational decline in gold stocks had ended. And, in retrospect, some gold stock measures (such as the Fidelity Select Gold mutual fund, FSAGX) have never gone lower than that day in 1998. However, after a 50% rise over several months, the SKI indices generated the third Triple Sell in November 1998 at USERX $4.02. This required the liquidation of precious metal assets, but appeared to make little sense: A unique historical bottom pattern had ended quickly with a Triple Sell that portended another multi-year decline. In fact, most gold stocks did end up declining over the ensuing two years, with USERX dropping to a low of 2.31 in November of 2000. And now the Triple Buy has occurred, essentially at the same price as that third Triple Sell, four years after the third Triple Sell.

Conclusions
Triple Sells were theoretically expected to portend severe declines lasting multiple years. That was born out by the price action that occurred after the development of the system in 1985. The first Triple Sell marked a secular decline in gold and gold stocks. This first Triple Buy should therefore mark the beginning of a secular rise in these assets. The short, intermediate, and long-term cycles have turned upwards. The SKI system appears to have marked out an enormous 4-year bottoming process that began with the buy pattern on 8/31/98. That was the left shoulder of a reverse head and shoulders bottom. The top of that left shoulder was marked by the third Triple Sell. The head, two years later in November 2000, was not marked by the system. The current Triple Buy would mark the right shoulder and the start of the upward breakout of that bottoming process commencing on 12/2/02. Although this article is being written subsequent to the sharp 2-month price rise that followed the Triple Buy, the interpretations given herein were posted elsewhere at the time of the Triple Buy and are not being stated on a post-hoc basis. Gold stocks are likely to be in a major up-trend for many years. The greatest gains usually occur in the latter "blowoff" stages of once-in-a-generation (or once-in-a-lifetime) rises. It will be interesting to see if the system obtains several (perhaps three?) such Triple Buy signals over the next 10-20 years. Many of the traditional technical indicators that worked well during the secular decline will fail during the coming years. Short-term and intermediate-term overbought indicators will remain overbought as the price surprises will be to the upside, pulled upwards by the long-term trend in human behavior. Note however, that although the SKI system portends a secular rise, a shorter-term primary bull market signal has not yet been generated. It will take at least 6 more months and probably, several years before a 92-96 index buy signal is obtained. Until that signal is generated, gold stocks should experience longer and more severe periods of decline than during such primary bull periods as 1979-1980 or 1982-1983 (when the declines last only two or three months). Those declining periods should, however, come from much higher levels. The price levels of early December 2002 should not be seen again until years after the secular rise has ended. The end of this secular rise should be marked by a new Triple Sell lying years ahead of us. 6

Jeffrey Kern Email: skigoldstocks@yahoo.com February 7, 2003

Source: http://www.321gold.com/

SKI Gold Stock Prediction


Jeffrey M. Kern, Ph.D. Email: skigoldstocks@yahoo.com Fri Sep 17, 2004

Happy with Wed. Not happy with Thurs.


The indices are generating a gold stock double buy signal for the close tomorrow through the close on Monday (Friday, 9/17-Monday, 9/20). The 35-39 buy signal is being executed at Friday's close and the 16-20 index buy signal will execute on Monday's close. The newer short-term index (that averages the 16-20 with a 15-19 indices; yields slightly higher profitability than the 16-20 index over all years) actually is buying tomorrow along with the 35-39 index. The 35-39 index is on the Path and is not XXed Out. It buys tomorrow in apparent synchrony with the short-term cycle. I described the detailed probabilities associated with a double buy in the 6/24/04 Update: If one buys on tomorrow's 35-39 signal and sold quickly on the (expected) rise into the 16-20 index sell signal, in the past, you've made money 35 out of 36 times, with the one loss being 1% and with half of gains falling in the small 1-3% range and the other half falling in the 5-8% range. HOWEVER, my colleague searched for times that these two indices' buy signals came tied/together, as is the current case. There were only two such instances and each was very different from the other and different from our current setup. One yielded a very large gain. The other sold out at a 1% loss in 2 days on an instant 35-39 index sell signal after the 16-20 and 35-39 tied buy signals. That was the one loser cited in the prior paragraph. My colleague says he's not going to buy on 50/50 odds. This week we were headed towards an incredible/impossible tied triple buy signal. If prices had risen on Wednesday (9/15), I'd have been writing tonight about 6-7 consecutive UP days into a weird tied triple buy. I was actually relieved that the tied triple buy did not come at the end of a major run up in prices. If prices had risen every day this week into tied signals it would have thrown my system into the perfect storm, a storm with an uncertain interpretation. But prices declined on Wednesday, avoiding the 92-96 index buy signal. If prices hold above 6.50 through the end of next week, the 92-96 index will buy, generating a TRIPLE BUY pattern. My colleague says that it won't happen, and that is why this double buy itself will quickly sell out at a loss. The stop on this double buy is clearly, definitively, a 35-39 sell signal. If prices fall below those 35-39 back prices, I must sell. Those back prices will be in the 6.30-6.51 area. Hence, as I've said before, prices really should hold USERX 6.51, but three or more days below 6.51 will probably generate a 35-39 sell signal that requires selling at a loss. The stop will take a week before it begins rising to lock in a profit. Therefore, the whole trade will either be nicely profitable or will sell out a loss very quickly (as usual). One the upside, all the double buy has to do is hold prices above 6.50 for the next week and we'll get a triple buy (more power). There's only been that one prior triple buy that started on 12/2/02 at 3.99 and saw prices rise 40% in about a month before retracing almost the entire rise in the subsequent 5 months before doubling in the next year. I'd therefore have to expect some type of instantaneous rise starting on Monday or Tuesday (Federal Reserve

announcement day), generating the triple buy late next week, generating an immediate 16-20 sell signal, and then going through the sell signal for a few weeks up to 7.82? before returning to the 7-7.20 area. I was happy with Wednesday's decline, but I was not happy with today's (9/16/04) 1-penny rise in USERX. We now have absolutely NO run pattern to indicate a bottom. If prices fall hard tomorrow to my targeted 6.51 area, that would make for a better buy than today's crappily high 6.72 USERX price. I had been hoping and expecting a beautiful definitive pattern and as is usually the case (but not always), the pattern is less than perfect. If prices fall for the next day or two that would make more sense and limit the risk involved with buying. You can tell that I'm having a hard time stating exactly what to do. Bummer. The indices certainly know how to mark critical points, so even though things seem to be quiet, I DO know that tomorrow-Monday mark very large critical points for gold stocks. My colleague isn't buying and asked (for the first time) that I publicly report his decision so as to balance my bullishness. But again, as you can tell, my bullish certainty has already been dampened. Nonetheless, I am going to buy half tomorrow and half on Monday (hoping that it goes down to 6.51 tomorrow and then up on Monday). Note that the Path is on a 35-39 index buy signal and not a 92-96 buy signal; hence this is not the start of a true bull, but a significant rise will hopefully ensue. Jeff Kern

Source: http://www.321gold.com/

SKI Gold Stock Prediction


Jeffrey M. Kern, Ph.D. Email: skigoldstocks@yahoo.com for Wed Sep 22, 2004

Isn't it all amazing?


Gold stocks surged higher today (Tuesday) EXACTLY on cue from the SKI double buy signals executed on Friday and Monday, as per the emailed Update sent last Thursday night. Gold stocks broke out to the upside today with USERX rising 3% to 6.93. I'd enjoy singing in the car but this move is just beginning and we've got some SKI signals coming tomorrow for Thursday's and/or Friday's close. Will the double buy pattern turn into a super-bullish triple buy? It's not certain yet. Today's rise worked perfectly, allowing for a tied 92-96 index buy signal and a 16-20 index sell signal for Thursday's close IF USERX closes over 7.03 tomorrow. Tied signals would constitute a triple buy pattern! However, if USERX closes below 7.03 tomorrow but above 6.93, the 16-20 index will sell on Thursday's close, one day before the 92-96 index is executed. That would not be triple buy, but it would still be pretty bullish. If we close below 6.93 tomorrow, both signals will be temporarily avoided and the odds improve for a triple buy. Therefore, I'd hope for a rise of more than 10 cents or a drop tomorrow to improve this already very bullish scenario. My target again is in the mid to high $7 range for USERX, specifically 7.76-7.78 (triple sell from 7.78 and the 50% retracement of the fall from 9.37 to 6.16 at 7.765). There won't be any index signal at that top, just time expiring on the rise and perhaps a run pattern. Since the system's Path is on the 35-39 index, this is not a true bull market and prices should form a meaningful top in 17-21 trading days from last Friday's buy signal. Within the next month I AM going to be selling into a rise. Although the indices are clearly bullish, please read this bearish case. The 16-20 sell combined with the 92-96 buy signal can mark a top, especially if we don't get the triple buy (see above). I said "can," not "will." Seriously, those signals can mark a top. If USERX rises another 10% this week into those signals, I will probably take the profits. As a side note, I received an email yesterday from a reader predicting a 2-day explosion and then an utter collapse. Although I poohed-poohed that possibility in my return email, that is now possible, but I still doubt it. The stop (on the downside) for this trade remains a 35-39 sell signal or a 92-96 sell signal (after we get the 92-96 buy signal this week). 8

What can I say? The indices did it again, on the button. I'm still waiting for the true bull signal (the 92-96 buy signal on the Path), but if the current rise continues for a few weeks, it's looking like it'll be HARD TO AVOID getting a true bull pattern after the ensuing pullback to the USERX 7.06-7.19 area. Isn't it all amazing? How is it possible for the indices to mark all these critical points to within a day? The indices don't even know our Treasury Secretary who seems intent on destroying our dollar (read his comments from yesterday), repeating for the hundredth time since the dollar began falling 3 years ago, in my own words as I read between his lines, "We want a strong dollar, but currencies need to float even more, and the Chinese need to let their currency rise and the dollar plunge." Is Snow following the SKI indices so that he times his comments on cue? Nope. Today's rise was "supposed" to happen: Nature. And lastly, the most important question is (and is being asked with affection), "Did Barb Moriarty, Bob's spouse at 321gold, follow through on her idea of buying USERX last Friday as her 60th birthday SKI present while Bob is in China?" Happy Birthday! This looks like BINGO but we need to keep rising! Jeff Kern

Source: http://www.321gold.com/