Current USERX price = 10.67, Up another 14.5% 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.
In the last gold stock SKI Report written on 12/14/08, titled "More Gold Stock SKI Technicals: Bear-to-Bull Transitions" (http://www.321gold.com/editorials/kern/kern121508.html), I described how SKI remained bullish on the gold stocks based upon a new 35-39 index buy signal and that prices were supposed to rise over weeks. Prices have risen about 14.5% in the subsequent three weeks.
I've tried to come up with something that is really interesting and compelling for this SKI gold stock report, but I've failed. This looks like it's going to be a brief Special Report.
Nothing much has changed in the past three weeks. Despite all of the talk about deflation, SKI analysis indicated that the gold stocks had turned multi-year bullish back at the temporary low in September 2008. Prices rose strongly, Jeff was happy, and then we had the once-in-a-lifetime decline. I sat through that, after having been multi-year bearish since May 2006 and multi-month bearish since March 2008, because the new pattern was so long-term bullish. Then SKI obtained additional buy signals and USERX is back up to over the September 2008 buy-in price. That was the first time that I've ever (in 25 years) experienced or sat through such a large (albeit somewhat short-term) excruciating crash.
The intermediate-term 35-39 index buy signal from 3 weeks ago continues. The prediction was that prices would rise to the master 92-96 index. Although prices have risen another 14.5% over the past three weeks, prices have not, as yet, reached that upside target (the 92-96 index that compares current prices to prices from 96, 95, 94, 93, and 92 trading days earlier). Therefore, as the first true trading day of the new year approaches, I do not know what will transpire tomorrow, but the gold stocks are supposed to continue rising into that 92-96 index. That conclusion would include the broad group of precious metals and mining shares.
The current 35-39 index buy signal from 3 weeks ago is a transitional signal that calls for higher prices into an intermediate-term top as prices hit the master 92-96 index. That rise is still in progress. If the expected rise continues over the next few weeks, Jeff is going to sell and then await a decline.
If prices decline in an appropriate SKI-technical manner over weeks, the master 92-96 index may generate (and is expected to generate) a true SKI bull market. That will be the first since the 2005-2006 true bull market. But the gold stocks will have to perform in a specific technical manner for that to occur. The first step is to make the transition (described in the last Special Report) from a bearish pattern to a bullish pattern.
The 2008 gold stock crash should have been a once-in-a-decade if not a once-in-a-lifetime type of decline and a massive buying opportunity in the long-term sense. For now, the gold stocks appear to be rising into a meaningful top in a few weeks.
My Very Best Wishes for the New Year and for what should be an interesting first market day on Monday, 1/05/09,
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. 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.