Current USERX price = 6.67, Up 25 cents (3.9%0) 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 SKI Report (written on December 23, 2018) continued to describe how the long-term USERX 663 index remained on its buy signal after having marked an exact low on 11/13/18 for execution the next day at USERX 6.28. Furthermore, a rise OR a decline was likely to generate a buy signal via the regular (shorter-term) 16-20 index (on a brief decline) OR the regular 35-39 index (on a rise). Therefore, the regular SKI indices appeared to be poised to join the long-term 663 index for bullishness.
I CANNOT “MAKE UP” INDEX SIGNALS. They are based solely upon a simple mathematical formula. Anyone can compute the index signals. THEY HAVE MARKED THE TECHNICAL SPOTS FOR DECADES often to the day (+/- 1-2 trading days). I rarely describe this because I incorrectly assume that you have been reading SKI for years, if not decades. After I’d begun public postings on the Kitco Forum on January 2, 2000, Bob Moriarty invited me to be an inaugural poster on 321gold.com. I sent out Excel programs that calculated the SKI indices to folks upon request. It just became too time-consuming to continue, so I eventually went to a paid subscription service almost exactly 13 years ago. The SKI website provides the simple mathematical formula that is the same for all of the indices and the website automatically calculates the indices each day. I can disclose the formula to you to use because it’s not just the index signals that are important, it’s the pattern of index signals that is most predictive. And those patterns are based upon the 45-year history of USERX. I adamantly state that USERX is THE index to follow because it is the only index (mutual fund) that automatically incorporates the gold stock movements across countries (the U.S., Canada, Australia, and South Africa) PLUS the movements in those countries’ currencies relative to the U.S. Dollar.
The Dollar Index by itself is a relatively poor index for predicting gold and the gold stocks because it is heavily weighted to the Euro, whereas the gold stocks are more strongly correlated with movements in the U.S. Dollar relative to the Canadian Dollar, the Australian Dollar, and the South African Rand. The correlation to the Japanese Yen “comes and goes” because that correlation is a function of the “carry-trade” that reflects “risk-on” versus “risk-off” behavior.
After USERX, THE HUI IS THE NEXT BEST MEASURE FOR SKI because the HUI at least includes Canadian gold stocks in Canadian Dollars. Therefore, I also calculate/report the SKI indices for the HUI.
After the 12/23/2018 SKI Report, the gold stocks (and especially the small-cap gold stocks) surged higher. The rise generated a 35-39 index regular SKI-System buy signal on 1/02/19 (On the Path of Trades and not XXed Out for potential intermediate-term bullishness) and then generated a 92-96 index “buy” signal THE NEXT DAY. The 35-39 INDEX MARKED 1/03/19 AND THE 92-96 INDEX MARKED 1/04/19 AS THE TECHNICAL POINT/SPOT at USERX 7.07 for both days. It is common for technical spots to be marked by multiple index signals.
The probabilities were very high that USERX 7.07 marked the technical spot. I’m talking 95+% probability as a high or a “bullish break-out”. History shows that this index pattern has an extremely high probability of marking THE technical spot. So far, those index signals have marked an exact high on 1/03/19-1/04/19.
What SKI “knows” (100%) is that those index signals did not mark the start of a bull market. The objective definition of a bull market is that the 92-96 index’s buy signal must come BEFORE (or tied with) the 35-39 index’s buy signal (i.e., the definition of a bull market should NOT be based on the percentage rise that is only available using hindsight; it is based upon the “structure” of the technical index signals at the start of a rise). That bull market structure missed by one day (not unusually). In January 2016, the 92-96 index’s buy signal came 1 day before the 35-39 index’s buy signal for that bull market.
I remain adamant that the multi-year sideways-decline from the Summer 2016 high has been CORRECTIVE: At least one more 100+% gold stock rise should occur. Yes, the corrective phase has continued for a seemingly endless time period, but it’s not been a long-time from an historical perspective.
The simpler and more straight-forward analysis is based upon the long-term SKI indices. Yes, the 663 index bought the 11/14/18 low for a potential long-term rise. I had expected that it had marked the long-term corrective low. BUT WHAT HAS RECENTLY OCCURRED CAN NEGATE THAT AND CAN BE HISTORICALLY QUITE BEARISH AGAIN. After the 1/03/19-1/04/19 index-marked high, the gold stocks dropped for two trading days and then popped back up on 1/09/19 to USERX 7.04. That rise was just enough to generate a new master 221 index buy signal.
The 221 index buy signal was a Double Buy with the previous 663 index buy signal. It could have been quite bullish. The index executed its buy (officially) on 1/10/19 at USERX 6.97. But the decline on the next day (1/11/19) immediately generated a 221 index sell signal.
The 1/12/19 execution of the USERX 221 sell signal at 6.88 ended the 663 index’s buy signal from USERX 6.28. Such quick master 221 index buys-to-sells are potentially very bearish (“ominous”) and stopped out long-term SKI. A new 221 index buy signal would negate that sell signal and such a buy signal would be On the long-term Path of Trades. If you look back 218-222 trading days, a rise to over USERX 6.74-6.93 during the next two weeks could generate that bullish buy signal with a nice rising sell-stop. The rising sell-stop is due to the fact that the index’s back prices will begin a 10% rising in 11 trading days from today.
I don’t know if the 221 index will or will not re-buy for potential bullishness. What I do know is that the 221 index has sold and ended the 663 index’s buy signal from 11/14/18. The situation is “dangerous” for the bullish case here and USERX has declined for the past 4 consecutive days since the 221 index’s sell signal…
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 daily messages/alerts at a slightly higher price along with access to our informative Forum.