Current USERX price = 6.05, Up 10 cents (1.7%) since the last report 3 weeks ago.
Introduction (repeated from prior Reports):
I have been using my unique SKI indices to predict price changes in the precious metals' market for more than two decades. And my indices continue to mark the critical points. I have initiated a subscription website since 1/13/06 (yes, Friday the 13th) after having posted free updates for years at www.321gold.com. SKI is a timing service; although almost everyone seems to believe that market timing is impossible, that IS what the SKI indices have done for 36 years.
The SKI indices contain short-term (16-20 trading days), intermediate-term (35-39 trading days), and long-term (92-96 trading days) indices. A more comprehensive description of these mathematical indices and their history is found here. Basically, the indices compare today's price to prices from a specified prior time period. The name of the index specifies the time period (e.g., 92-96 index = compare today's price to prices from 96, 95, 94, 93, and 92 trading days earlier). Although I use the oldest gold mutual fund, USERX, for analyses, the predictions are applicable to the broad precious metals' market. I do not recommend or analyze specific stocks, but my subscribers from around the world regularly discuss individual issues on our Forum. In addition to the truly unique SKI indices, I also use "run patterns" to guesstimate turning points in the precious metals' market. 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, moderated by the indices themselves.
The last gold stock SKI Report, written on Sunday 10/05/14, was titled “More Bearishness” and that conveyed the conclusions of that Report: There weren’t any index signals to designate a potential low.
That Sunday night, gold declined to its 2013 lows and then rebounded, forming what some analysts have viewed as a “Triple Bottom”. And although gold has held well above that 10/05/14 low, the gold stocks have not been behaving in a bullish manner.
The gold stocks did surge higher on 10/08/14 subsequent to the release of the U.S. Federal Reserve Committee’s meeting minutes. That “just happened” to occur 92-96 trading days from the gold stocks’ 2014 low on 5/28/14 at USERX 6.27. Therefore, the 92-96 index’s back prices that day were 6.59, 6.56, 6.34, 6.27, and 6.32. With USERX closing at 6.28 on that day, the gold stocks had only rebounded to hit/touch that resistance. If they had continued higher to generate a 92-96 index buy signal, that would have been a sign of bullishness, but the gold stocks then immediately retreated after having hit/touched the master index’s resistance.
And then the gold stocks rose again into 10/15/14 – 10/16/14 with USERX rising back to 6.23 on both of those days. That “just happened” to occur when the 16-20 index’s back prices were 6.71, 6.63, 6.43, 6.23, and 6.38. Therefore, the gold stocks had again risen to exactly hit/touch the index resistance. A rise over those 16-20 index back prices was and IS needed for any bullish case, but that resistance held again as the gold stocks declined.
This past week, USERX rose back up to 6.24 on 10/21/14. The 16-20 index’s back prices that day were 6.38, 6.36, 6.39, 6.30 and 6.26. Therefore, the rise did not even quite hit/touch the 16-20 index before declining strongly the next day.
A rise over the 16-20 index continues to be required for any bullish case. The index’s back prices are declining. On this past Thursday (10/23/14), the gold stocks rose a little, with USERX closing at 6.12. The 16-20 index had a low back price of 6.14 on that day. Therefore, the gold stocks were once again unable to even hit/touch the 16-20 index.
The 16-20 index’s back prices are continuing to decline. Tomorrow (10/27/14), the new low back index price will be USERX 5.95. Will USERX decline below 5.95 within the next two trading days to continue to avoid the 16-20 index’s resistance in a bearish manner?
The only bullish indication is that the USERX 218-222 very long-term index HAS generated a new buy signal. Such buy signals often yield multi-week to multi-month rallies. Interestingly, whereas GDX, HUI, and GDXJ have made marginal new multi-year lows during the past week, USERX remains well above its December 2013 multi-year low of 5.70. USERX has been outperforming those relatively narrow indices by a solid margin. The 221 index’s back prices are about to bottom at 5.70 because it’s almost 218-222 trading days from the December 2013 low of 5.70. A further decline that avoids going over the USERX 16-20 index and sells the 221 index should yield another “Armageddon-wave” down to major new multi-year lows. But if USERX can finally get over the 16-20 index while remaining on a 221 index buy signal, the multi-week to multi-month rally should occur. Therefore, it’s all still bearish at this time, but a rise for at least a month IS feasible as USERX has remained above the 5.95 low from the last Report and the 221 index has generated its buy signal. A decline to below USERX 5.95 this coming week will maintain the gold stocks’ bearish behavior.
Best Wishes, Jeff
If you are interested in following and learning more about the SKI indices, I'll write another Report in three weeks or you can shell out the big bucks for a SKI subscription. Weekly Updates are available by subscribing for a month (or longer if you're wise and cheap enough to want to save money) at my website www.skigoldstocks.com for the princely sum of $25 (for a one month subscription) or more ($200 for an annual subscription). I also provide more frequent intra-week messages/alerts at a slightly higher price along with access to our informative Forum and a managed gold futures program. The precious metals are in a very long-term (decade+) up-trend but are the most precarious, volatile, and psychologically difficult market in the world (in my opinion). That's the way it's always been.