Current USERX price = 4.89, Down 7 cents (1.4%) since the last report 4 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 12/06/15, described how the gold stocks (USERX) had just generated an unusual 92-96 index buy signal that executed on 12/04/15 at USERX 4.96. The buy signal was XXed Out, so it might have marked a high. But any time that the master 92-96 index gives a buy signal during oversold conditions, bullishness is also a possibility. Therefore, that last SKI Report was not predictive, except that the XXing Out indicated that a real bull market (with 100-500% gains) had not started and that a decline to a 92-96 index sell signal was the sell-stop on any long positions. Jeff had not bought and had not recommended buying to subscribers.
As has been the case for more than 40 years, the index signals mark the technical points over and over again. That XXed Out 92-96 index buy signal marked another exact top: USERX and gold have been below their 12/04/15 price every day since that last SKI Report was written and the immediate decline on the day after that Report was written made that rather evident.
The decline took USERX below the 92-96 index on 12/17/15 for an index signal that executed on 12/18/15. Such a sell signal provided the possibility that a major decline would follow immedaitely, but this time the index signal generated on the exact day of a low. That was a possibility and thankfully Jeff did not recommend or initiate a short position.
USERX then rose for 5 consecutive days from the 12/17/15 low into 12/24/15 at 4.91. It was within one day of generating a 92-96 index buy signal that was NOT XXed Out. USERX just needed to remain above 4.89 on the next trading day. Jeff doubted that the situation would turn bullish for several technical reasons. First the 5-day run higher was “stretched” to the upside and was due to end. Second, the HUI had just executed a bearish Double Sell index pattern that marked 12/24/15 with a 92-96 index sell signal for a likely high (yes, I do compute the indices for the HUI but primarily rely upon the index signals for USERX). Third, if USERX was going to generate that 92-96 index buy signal, it was likely to be whipsawed with an immediate sell signal because the index’s back prices were flying higher (so it would be difficult for USERX to rise enough to stay above the index’s rising back prices).
And so the gold stocks declined last Monday (12/28/15) to avoid the 92-96 index’s buy signal. And this past Thursday’s (12/31/15) rise simply took USERX back to exactly hit/touch the 92-96 index at 4.89 and hit/touch the 35-39 index’s resistance.
But the SKI indices are approaching a rather rare bullish set-up. Since the gold stocks have been going basically sideways for months, we are getting close to being 92-96 trading days from USERX’s multi-year low of 4.59 from 8/26/15. The index’s back prices will soon plunge from 5.18 to 4.59 over 4 trading days. Meanwhile, the 35-39 index’s back prices are also declining. If USERX declines, it has the rare possibility of going below the 16-20 index for a buy signal (since that index buys on declines and sells on rises) while almost simultaneously staying above the other indices to generate their buy signals.
Such an index pattern is referred to as a “Double Buy” if there are two buy signals and a “Triple Buy” if all three indices buy together. Perhaps you were reading SKI when the last Triple Buy occurred on exact low in December 2002, read here; gosh, I’m getting old; smile).
The SKI indices for USERX and the HUI are still bearish as of today. But the rare possibility of a master 92-96 index buy signal on a decline, along with additional index buy signals, is approaching over the next few weeks. At this point, it is just a possibility and I do not “know” if the index buy signals will occur. We would basically need a gradual decline. A rise would avoid the most clearly bullish possibilities.
Best Wishes for the New Year, 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.