Current USERX price = 11.76, Up 30 cents (2.6%) 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 12/23/12, described a run pattern that was likely to be forming an intermediate-term low but that additional new lows were quite feasible. Furthermore, that Report discussed the need for the gold stocks to begin rising to avoid “the death of the infant bull market” via a 92-96 index sell signal. USERX had declined for 5 consecutive days and the run pattern was suggesting another low within a day.
Since that Report, USERX barely declined for 2 more days to form a 1 Up and 7 Down run pattern into 12/26/12. That run pattern suggested yet another low and that low HAS held so far at USERX 11.45. The rise into 1/02/13 formed a classic 1 Down and 2 Up SURGE pattern whereby the 2 days up rise 5%. Such run patterns have a 12 for 12 history since 1974 for marking an intermediate-term (multi-month) low, but it also yields a short-term decline. The gold stocks (and gold) “crashed” immediately after that run pattern, but that is the historical “norm” and Jeff can only smile when reading the stories of “market manipulation” regarding gold’s plunge on 1/03/13-1/04/13. Gold’s plunge to a new “corrective” low at $1626 appeared to complete a rather textbook Elliott Wave correction via a 3-3-5 pattern (3 waves down from the 10/04/12 high, 3 waves up to the 11/02/12 high, and then 5 waves down into the night-time low on 1/04/13).
Since the 9/21/12 high at USERX 13.75, each time that the gold stocks have risen, they have been rejected as they rose to hit/touch the USERX 16-20 index. That’s occurred on 11/08/12, 12/12/12, and 1/02/13. The bulls (Jeff) need a rise that goes over that index’s back prices. This coming week, those USERX back prices will be at the late December low of 11.56, 11.46, 11.46, 11.46, and 11.45. Therefore, if the gold stocks can hold or rise this week, the downtrend from the 9/21/12 high will be broken. But another hit/touch of those back prices, followed by a decline to below USERX 11.45, would maintain the intermediate-term down-trend from 9/21/12.
The bigger issue has been whether the gold stocks entered a true SKI bull market on the master 92-96 index buy signals on 9/05/12-9/06/12 (the “break-out”). That’s important because true SKI bull markets yield 100-500% rises within a year. Unfortunately for the bulls, the 92-96 index HAS sold after the gold stocks broke several historical bull market “rules” (behavioral patterns). That does NOT mean that the gold stocks are going to decline and the index signal can be marking a rather exact low in the HUI this past week, but it does mean that a significant rise should be sold into in anticipation of another correction. The 92-96 index is very close to generating a new buy signal as its back prices (look back 92-96 trading days!) are at 11.89, 11.88, 11.70. 11.67, and 11.54. The bulls (Jeff) need that new buy signal.
The next intermediate-term directional move in the gold stocks should initiate during this coming week (not necessarily tomorrow). The SKI 92-96 index is within one day of generating a new buy signal that has a rising sell-stop and the likelihood of yielding a rise to a high that is above the September 2012 top. The massive hedging statement is that “Since USERX is right at the edge of being below ALL of the SKI indices, a failure to obtain that new buy signal could result in a dramatic decline that doesn’t have any index targets on the downside”. Therefore, this is an extreme Report, but the run patterns are predicting the significant rise and a new buy signal would be the “risk-averse” place to buy during this coming week for an intermediate-term gain (up to longer-term index resistance signals) before the next correction occurs to form another higher low over months.
Best Wishes, Here we go, 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 marketin the world (in my opinion). That's the way it's always been.