Current USERX price = 14.05, Up 99 cents (7.6%) 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.
In the last gold stock SKI Report written on Sunday 1/15/12, I tried to describe how the December 28, 2011 low could have been a long-term low (due to the hitting of the long-term 660-664 index), but that prices had risen into the first resistance (the 16-20 index sell signal). Nonetheless, due to the prominence of the long-term cycles/indices over the past year, the expectation/prediction was that the gold stocks would have another rally into the 663 index’s resistance sell signal.
That first resistance during the week of 1/09/12 was followed by some downward pressure on the gold stocks. Although the broad-based mutual fund, USERX, only dropped 2%, the HUI index was particularly hard-hit due to negative fundamental news on Newmont Mining and Kinross Gold. The SKI indices computed on the HUI index (but not USERX) actually generated a true mechanical short-term 16-20 index buy signal on 1/20/12 as the HUI fell below its prices from the prior month.
And then the precious metals’ sector had a second surge higher from the December 2011 low subsequent to the 1/25/12 U.S. Federal Reserve announcement. That rise yielded another set of index resistance signals: The HUI’s 16-20 index sell signal on 1/27/12 (for the typical quick one-week 8% gain for that index) and the USERX 663 index sell signal that had been anticipated in the last 321gold SKI Report. Last week was also marked by a HUI 221 index signal. That 221 index is the long-term system’s equivalent of the master 92-96 index and represents a several-year potential true bull market buy signal. However, Jeff doubted the bullish validity of that buy signal because the signal occurred as the HUI rose over a LOW from 218-222 trading days earlier. In other words, it looked like that 221 index signal might be marking resistance because it was going to sell quickly if the HUI didn’t quickly rise to over 570. And unless the HUI flies up to over 565.59 tomorrow (2/06/12), the 221 index will generate its quick/whipsaw sell signal (as expected). I don’t want to bore you with further details, but the USERX/HUI 35-39 index resistance was hit/touched last Wednesday and the USERX 884 index resistance was also hit/touched last week.
With the expected rise into multiple index resistances, Jeff “had to” recommend selling at least half of the gold stock positions purchased at the end of December (but none of my core physical bullion position). The prior 1/15/12 Report’s bold-faced conclusion (“a subsequent decline would yield the once in several-decade index/cycle pattern of simultaneous identical buy signals on both the regular and the long-term mechanical systems”) remains valid and I’d love for that to occur. The problem is that time has been stretched to the maximum and such a “subsequent decline” would now need to be strong, swift, and immediate/instantaneous (perhaps 10% in just a few days; you’d see it by the time this Update is published on 2/06/12). Such an exact and rather extreme decline is a rare event and I dare not predict that will happen, but the SKI indices are suggesting “some type” of decline at this time. I wish that I could be more specific, but there are multiple long-term and short-term indices/cycles that are “in play” here. That allows for a variety of index signals and outcomes over the next few weeks. The most common outcome would be a period of “playing around” (i.e., down and up and down”) over the next month. If prices do rise, the next resistance is the 92-96 index. As you may be able to surmise, the gold stocks have a number of significant index resistances to overcome, but the very long-term prognostication continues to be bullish from the 2008 Life Run low.
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.