11 replies to this topic

[TomD]

SKI Update
4/30/04

I only write when I have something to say and last week there was
nothing new to say, so there was no Update. However, I DID write an
article entitled "The SKI Triple Sell" that is added below. There's
nothing very new in it if you read my prior Updates. I wrote that
article because I had written the "SKI Triple Buy" from 12/02 at Gold
Eagle and felt an obligation to write that the stop had been hit. Gold
Eagle has still failed to acknowledge receiving that article despite
several sendings. Since the communications (emails) were not returned,
I have to assume that they received them. I therefore have to conclude
that something is unethical, period. The 321gold and mineralstox sites
deserve your hits for being OBJECTIVE ethical sites. Stay away from the
dogmatists for your own financial health.
The last two weeks have been predictive nirvana for me, but I don't
want to be self-congratulatory. Nonetheless, reread the prior Updates
and see how I stated that any move below the Triple Sell area of 7.85
would produce a crash and that the crash had to occur by 9 trading days
after the 16-20 index double XXed Out "buy" signal. Did you see day
nine crash by 8.5% (a little less than the 10% predicted)??? Do you
understand that Triple Sells do NOT occur because of a continuous fall
through the equivalent of 3 moving averages? They always empirically
require 5 months (92-96 trading days) of sideways topping action before
a sudden exact little drop. The last rise after 5 months is the hook
that kills the rise and sets up the great fall.
Although the precious metals are extremely oversold, the current
crash should continue very shortly. The average drop through an XXed
Out 16-20 index "buy" signal is 25%. We've only dropped 12% so far, so
another crash is imminent.
Thankfully, my colleague DID sell at 7.35 on 4/21/04. He lost an
enormous 13%, but was happy that he kept most of his large profits from
the last two years. He conducted a weekend analysis of SKI2, a slight
theoretical variation on the system. SKI2 eliminates just a little more
information by comparing the current price to the average of the past
five prices, five times, and then takes the velocity and acceleration.
The results are still being reviewed, but the recent Triple Sell pattern
still was obtained. He concluded that this was the worst triple sell
ever and I sent out the "SKI Alert of the Century", in a brief late
night frenzy. All investments that can lose principle value MAY be
going down. Be safe.
The article below left out one paragraph that I deleted. I was
trying to guess what fundamental event would be used to account for the
precious metals (and all investments') decline. I left in the bond
market's recent inverted relationship to the PMs. I deleted the
paragraph on the possibility that China would be reported to be in a
recession/depression! That's what the press has now reported, after the
fact, as far as I am concerned. Technicals/psychologicals/SKI indices
rule in advance! Since writing that article, Donald Trump added in the
triple sell of getting married! The article below also contains an
error: Richard Russell gave some SKI-type warnings of major declines
within a few days after I wrote the article. I don't know how the great
one does it. By the way, the greatest guru, John Templeton, who stated
in 1990, "Dow 10,000 in 2000", predicted in 2000 that "20% of U.S.
homeowners will lose their homes".
The indices will not be able to call the first bottom, but for
those readers who believe that we're shortly approaching a major bottom,
I say, "Triple Sells don't produce bottoms in 2 weeks or a month".
Perhaps 6 months, a year, 2 years. It's only been 2 weeks since the
triple sell. Beware long positions. Reread my Introductory article
that should contain information on how major bottoms are identified.
The next major bottom, I believe, will be the best EVER, and most of you
readers will be done reading SKI Updates by then. Actually, the
long-term prediction is that I will either be dead or that all the gold
mutual funds will go out of business on the exact day of the bottom (I
am actually serious; the ultimate natural paradox).
The next bottom call will require a low, followed by a rise, and
then a fall to a system buy signal (or an incredible 2 Up and 10 Down
crash run pattern like 1976). Most likely, we are simply going to get a
rise back to this very area (look at the chart gaps) in a few months
marked by a 16-20 index sell along with a 35-39 index XXed Out buy
signal to mark the next top. We'll see, but do not go long here.
Rebounds will disappear as fast as an eye-blink. The long-term 218-222
index, that bought last Summer at USERX 4.98 is currently at 5.28 and
rising. It should and will sell at a profit soon. That is still quite
a fall to get there. Fibonacci numbers all congregate around USERX
5.00, the target given earlier this year.
Two weeks ago I called and emailed everyone that I know. My Aunt
said, "Jeff, you called me the last time in 1987 regarding this stuff,
and yes, you called that top well, but no one can predict the future,
and I'm in the most conservative investments possible". Most relatives
did not respond. One friend sold his home this weekend and is just
buying a smaller one. My house price has risen another 10% in the last
few weeks. A camping buddy, who invests based upon a subscription to
Martin Weiss (not recommended), was told during our late September 2003
camping trip to sell his GG and FSAGX in early December. I had
refrained from calling him in December or January because I knew that he
was a long-term buy and holder. My recent call to him indicated that he
was still long but would read my email attachments. I haven't called
him back, but will camp with him soon. Both investments, that were
ahead 40%, are now at meaningful losses and I bet that he didn't sell.
Of the now 2500 people on my email alert list, I'd guess that 25 (1%)
actually have sold. Frustrating, but c'est la vie. I accept it.
In the next two weeks, I'll be spending a week with family for my
eldest son's graduation from the University of Southern California, then
go camping in the high Sierras for a week, then go with the wife to the
South Pacific for 2 weeks, then be lecturing psychology for 5 weeks,
then take the 2 sons to Yellowstone and the Tetons for a week or so.
Updates will be limited. If there is some great bottom pattern I'll
find a way to communicate, but I doubt that will be necessary. Be safe.

P.S. READ THIS. I just got the mail. Although you believe that my
writings are simply the rantings of a lowly academic, you may not really
understand. My international consultants in Switzerland sent me the
following letter today, inviting me to their conference in the Bahamas.
The speakers include Sir John Templeton, Ken Coleman, and Don
McAlvaney. Not me, since I remain in the shadows. Read this link at
www.bfi-consulting.com . There is a RED link on the home page. Their
predicted dollar decline may be correct, but the SKI indices will
capture the big move that will rock the financial world. I won't be
attending as I'll be doing my teaching, practice, research, and pro bono
work. It's all a matter of timing. Scary huh? Appropriate. Be safe.


The SKI System Triple SELL Signal: Long-Term Implications for Gold
Stocks

By Jeffrey M. Kern, Ph.D.

Over a year ago I published the article entitled "The SKI
Triple BUY Signal: Long-Term Implications for Gold Stocks" (please read
one of the following links for that article and a description of the SKI
indices: http://www.mineralst...t.asp?newsid=30 , or
http://205.232.90.19..._triplebuy.html , or
search for Jeffrey Kern). That article (with the obvious BUY in the
title) portended a major rise in the precious metals. Robert Prechter
(whom I greatly respect) wrote shortly thereafter that the golds had
topped and cited the fact that even new technicians (me? Or am I too
narcissistic?) were issuing large buy signals. The average gold stock,
as measured by the performances of gold mutual funds (e.g., USERX), rose
more than 125% off of that triple buy over the next 13 months. Readers
were instructed that they could simply stay long until a triple sell
signal at some unknown distant time in the future. That first triple
buy pattern in 30 years led me to expect a decade of rising gold
prices. This article is being written to inform you that, surprisingly,
the triple buy signal has been reversed. I know that almost all of the
famous technicians that I respect (the Aden Sisters, Richard Russell,
Adam Hamilton, Jim Sinclair, and more) are writing articles touting the
oversold nature of gold this week (I apologize if I misrepresent or
misquote anyone, but I don't believe that I am). Maybe my face will be
full of SKI dung, but all I can tell you are my empirical results. This
is not my opinion or the results of an oscillator or a moving average.
It is pure original SKI indices. And I act upon those indices and
always use stops. The indices and statements are of an extreme nature.
That triple buy article also contained the statement (yes, read
every statement because each sentence is carefully written and is
important), "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)." The SKI indices never
obtained that primary bull market, although in the mid-summer of 2003 (6
months later), the indices missed that signal by one day, did predict a
major rise, but missed declaring the massive primary bull market signal.

For more than a month before the middle of this April I was
describing the 2 weeks in the middle of April as being THE critical time
period for the determination of the answer to the great "Inflation vs.
Deflation" debate. This period was highlighted because my indices were
going to do an extraordinarily rare "triple cross-over", whereby the
longer-term (92-96) index was going to rise above the medium-term
(35-39) index while simultaneously, the medium-term index was going to
rise over the short-term (16-20) index. When that happens, I had to get
either the great primary bull market signal or the extremely bearish
"triple sell" signal (a 5-month major topping pattern). Nick Laird
("Sharefin"), at his wonderful chart site (
http://www.sharelynx...-Sentiment1.php ), was
able to see it in advance and even highlighted that area of time for his
viewers because he could see the cross-over approaching.
On Monday, 4/11/04, I was forced to send an email alert (free) to
readers. The following is an excerpt from that special alert: "Since
you are kind enough to read my Updates, I feel the moral imperative to
alert you to the fact that my 92-96 index, has generated a sell signal
for tomorrow. Tomorrow WILL be marked. Although many major gold stocks
and indices (e.g., the XAU) closed slightly higher today, my measure,
USERX (the gold mutual fund), closed meaningfully lower, dropping below
8.50 and 8.44, to 8.36, generating my 92-96 index sell signal. I sold
today. A drop of about 4% tomorrow (USERX below 8.07) will generate a
triple sell pattern. Today's action suggests that tomorrow may yield a
large decline across the gold stocks. This was the critical time period
and the gold stocks did the unexpected and ominous fall today." The
next day the gold stocks fell 5% and the triple sell pattern occurred.
That weekend I wrote, "all I can say is that the prior three triple
historical sells have yielded 60-90% declines in USERX over several
years corresponding to disinflation or deflation. Remember that my data
include all SKI indices since 1974. Detailing that further, the first
triple sell in the mid 1980s caused a fall of about 35% within 2 weeks
after the signal followed by months of sideways action and the eventual
decline of 80% over two years. The second triple sell in the mid 1990s
did not result in any immediate decline. In fact, prices stayed flat
and actually rose about 15% for a frustrating year (for me) before a 90%
decline into September 1998. The third triple sell at the end of
December 1998 led to an immediate decline of 20%, up and down action for
7 months and an eventual decline of about 50% into the bottom of late
2000."
THE CURRENT TRIPLE SELL WAS THE PUREST IN HISTORY AND THEREFORE IS
EXPECTED TO GENERATE THE GREATEST AND HARDEST DECLINE EVER WITNESSED. I
realize that this is an extreme statement and that anyone who makes
predictions will avoid trying to pick the proverbial "needle out of the
haystack" so as to protect "their rear end". Nonetheless, that is what
I have and so I state it publicly with sweat on my brow. My indices are
usually so precise that they'll mark points to within a day and a
penny. Since that triple sell pattern the gold stocks have fallen
another 5% in a week and THE ONSLAUGHT SHOULD JUST BE STARTING.
I know that I am preaching against the choir. It is not me, I only
follow my indices, which my 20 years of experience suggest have captured
the true natural laws of the precious metals' market (I know, no one
believes that they exist or that this is possible except crazy old
scientist SKI). I believe and know that gold will eventually be THE
asset to own in order to preserve one's wealth. However, apparently,
that time has not yet arrived. A year ago while I was camping with my
friends, one asked me, "Well, Jeff, you've been predicting
disinflation/deflation for 15 years now. You've finally been vindicated
as the Fed used the words "deflation concern" in their last statement.
Congrats. What now?" My response was, "I'm on a triple buy signal and
have now become a major inflationist". Prices have been rising. But
the triple sell pattern now turns me back to deflation (unbelievably to
me because everything is still going up, except my gold stocks). Real
estate should crumble within the next year and I AM selling (see:
http://205.232.90.19...rn/current.html, or
http://www.mineralst...DateTime&desc=1
).
A number of analysts have suggested that we are entering the
equivalent of the 1974-1976 period for gold stocks, meaning that a
decade-long rise is still intact, but we may be about to go through a
major correction. Perhaps that is true, but from 1974-1976, the gold
mutual fund USERX declined 80%. I don't want to sit long during such a
"correction". Incidentally, the SKI indices never generated a true
primary bull market signal prior to 1978. The system did give the
"great bottom" buy signal one day after the all-time low in 1976.
Other markets: The SKI indices only work for the gold stocks as a
broad group. I have learned through study and experience that ALL
inter-market relationships may persist for many years, but eventually
and suddenly they change. In the early 1980s I paid ($15?) for the "Big
Files" (or something like that), the first of which was on how to make a
fortune trading the TED (T-Bill vs. Eurodollar) Spread. The little book
showed how that spread always vacillated between two extremes and how
one could initiate positions at one extreme and then just make a fortune
riding it down to the other extreme and then reverse it back up. It had
worked for a decade. You can guess that as soon as I tried it, the
spread broke through the historical range and never returned.
I have successfully predicted major changes in the direction of
interest rates using my SKI indices on gold stocks for 26 years. The
simple rule has always been: After the indices predict a major rise in
the goldies, interest rates will bottom (bonds will top) 6-9 months
later. For example, look at 1993-1994, a SKI bull market in gold stocks
and the greatest decline ever in bond prices. BUT THIS RELATIONSHIP HAS
BEEN REVERSED FOR THE PAST THREE YEARS: The gold stocks have risen and
the bonds have also risen (interest rates have continued down)! When
the government announced the cessation of the issuance of new
thirty-year bonds, I wrote, on that day, that the bonds had topped on a
long-term basis. After all, that Fall day came 9 months after the gold
stocks had begun their major rise and it was a massive spike up in bond
prices. That day was an intermediate (months) top, but bonds eventually
kept rising even as the gold stocks kept rising. THE RELATIONSHIP
BETWEEN GOLD AND BONDS HAS INVERSED AND THIS APPEARS TO BE OF MAJOR
HISTORICAL IMPORTANCE. Now, if the golds decline as expected, bonds may
actually decline along with them. It makes no sense to me, EXCEPT that
this inversion may be the unknown fundamental factor that precipitates
the ensuing disinflation/deflation that the triple sell signal
portends. The general stock market has been following the gold stocks
with a lag of three weeks. They may not have topped as of yet, but
their top appears to be likely this year.
I am a "goldbug" in the sense that I believe that the precious
metals are the true source of wealth preservation. History shows that
all fiat paper currencies eventually are debased and become worthless.
That's what led me to research the gold stocks and it's all that I
purport to be able to do with my empirically-derived and
theoretically-driven indices. The current situation is extraordinarily
ominous for all asset classes that can lose principle value. The triple
sell has occurred and I can't do anything about it. If it's reversed,
I'll report it. I can't predict when that will occur (In a month
-unlikely, or in a year). I'll know when it happens. Be safe and
extremely vigilant. Use stops to protect yourself in case my indices
are correct and you don't believe this.
This is your moral, ethical, overly-emotional chicken SKI scientist
reporting..

P.S. I like to employ a little levity in my serious financial
writings. Hence, my best trade recommendation is to sell short Donald
Trump. The shares are symbol TRUMP and sell on the BIGHEAD exchange.
Trump went "bankrupt" in the mid to late 1980s and the shares appear to
be topping again along with everything else, a true contrarian
recommendation based upon his hit TV show, commercials, real estate, and
"highly" moral/ethical personality style. Legal Disclaimer: This is a
joke, don't sue me because you can't collect anyway (and I'll be
correct).

Jeffrey M. Kern, Ph.D.
Email: skigoldstocks@yahoo.com
April 22, 2004

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.
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. Communications should be sent to:
skigoldstocks@yahoo.com . However, Dr. Kern will NOT be reading or
answering emails for at least several weeks due to the deluge that has
stressed him to the point of needing a vacation from such
correspondence! DO NOT EMAIL FOR ONE MONTH. I DO NOT WANT TO WATCH
THIS HAPPEN. SERIOUSLY.

[VolPivots]

TomD, Do you have a link to the recent articles? TIA, MN

[Regent]

Tom, thank you very much for posting this article. The China slow down, energy price crunch, NA realestate bubble, and the topping action of NA indices give credence to this gentleman's warnings.

[TomD]

he is carried on 321gold.com

[stockbucks_coffee]

I read his article in Dec. 2002 about his indicator gave a triple buy signal for the first time...was it...since the early 1970s and he stated that a decade gold bull market was on the horizon. The gold had already bottomed in 1990-1991. So his signal came after the gold bull market was already at least 1/3 or 1/2 through before the Jan./Mar. 2004 'double top'. So I read now that his indicator gave a triple sell signal in early April (and that's after the COMEX gold had already double topped in Jan. and late March.) And now he believes there won't be a decade long gold market after all and the likes of Aden Sisters, Richard Russell, Adam Hamilton, Jim Sinclair touting an oversold gold could be proven wrong. Curious to mention but at least I remembered the Adam Sisters and Adam Hamilton did warned about a m/t pullback in POG early this year and they been on the gold bull market for several years. Makes me wonder if this Dr. Kern and his indicator has been lagging a bit. Interesting to see how these respected Technicians pan on their gold forecasts.

[TomD]

I don't profess to understand the SKI system...it appears to me to be a fib-based price action system....althought I recall him calling it a risk management system...with diffenet signals having different levels of "quality"...obviously triple buy and triple sells are not that frequent..but very reliable..and thus is emphatic reccomendations

The Aden Sisters have the 65 week moving average as thier line in the sand...and if youy look at weekly charts you will see why.....it bounced off that last week but if Kern's crash scenario plays out then that ma will be taken out

I also follow Hamilton and read most of his articles....he has one weakness in that he tends to go to the same well of indicators all the time and does not allow for changing market environments.....becasue of that he was telling everyone to go massive short the markets..talking about waterfall cascades...of course they got run over by a truck

I did up a pile of bullion charts....my reading of the tea leaves usggest that 350 gold will be hit.....near term...things are oversold for POG on a daily basis but not as oversold as the bulls would have you believe...I don not think the HUI would have crashed if the dollar rally was over....

I am all cash now...one because I feel that things are getting creepy out there...and I am not sure how it will play out

The US government books are a catastrophe waiting to happen ...printing money like in the days of Vietnam...and fiscal policy that made Reagan look like an Austrian....at some point the USD is going to blow up....but when

So I am in cash...ready to jump on golds if I see some techncial damage get overcome....but more hoping that some "systemic" phenomena artificially bootst the USD index....undwinding of carry trades...interest rates hikes....short covering.....something like that could drive golds stocks into the ground...and it would be a glorious opportuntiy to "do it again"

Charts at Gold Charts Annotated

[stockbucks_coffee]

TomD good point you have there. Dr. Kern may be proven right in the long term horizon. My gripe about his indicator is it's signals are lagging compared with the Technicians I mentioned. Well, everyone carries some baggage as you noted. Russell is more a looonnnggg term timer. Not for someone if he/she's in it for the mt or st. Adam Hamilton, yes, had a terrible year in the stock market last year. If it wasn't for gold and silver he would had been in alot of trouble. And the ladies, the Aden Sisters, have done fairly well compared with these guys so far. Kudos for them.

[swanstkdh]

this mr. kerns has another post over at 321 gold on april 19th that these crashes we are experiencing could be marking a MAJOR (he putz that in bold type) Bottom. His lagging post talks about the triple sell that has been activated. Now this is all very confusing and he admits that it is as well stating that the indicators are very complex this time. No one knows but I think those chinese know exactly what they are doing and put out that info to bring the price of gold in to an area they feel is more profitable for them to buy at. They put gold on everything.

[pigeon]

Is Kerns "triple sell" any more complicated than the price and two short-term MAs having moved below his long-term MA? It's just a fancy MACD it seems to me. All moving average indicators "work"...eventually.

[SevenOfEleven]

Is Kerns "triple sell" any more complicated than the price and two short-term MAs having moved below his long-term MA? It's just a fancy MACD it seems to me.

All moving average indicators "work"...eventually.

I haven't followed SKI enough to give any pros or cons on it's predictive quality but YES, it's definitely more complex than just a fancy MACD.

For the gory details read his description: SKI's Methodology

-Seven