Current USERX price = 6.86, Up 31 cents (4.7%) 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 1/20/14, concluded that “A rise into the second resistance, the 35-39 index is under way (as USERX rises over the prices from 35-39 trading days earlier). That second resistance index signal is approaching (date reserved). Short-term traders should sell into that index signal because a short-term decline will be highly probable. Then the gold stocks are expected to rise again into the major long-term resistance, the 92-96 index (as USERX rises over the prices from 92-96 trading days earlier)”.
The 35-39 index signal had actually generated on the Friday before that last SKI Report (I have to reserve something for subscribers). The execution of index signals occurs one trading day after the signal generates. Therefore, the 35-39 index’s resistance signal executed on 1/21/14 at USERX 6.67. Again, the historical expectation was that it would mark a short-term high. The likelihood was that the index-marked high would persist for 10-15 trading days with a lot of “playing around”.
Those two historically-based expectations were rather exact: 1/21/14 was an exact high and the gold stocks “played around” under USERX 6.67 until this past Friday (2/07/14) when USERX broke above that 1/21/14 high of 6.67. Friday (2/07/14) was 13 trading days from the index signal.
During this past week, the HUI only rose .8%, GDX only rose 1.8%, but the smaller miners (GDXJ) rose 8.4%. USERX is the preferred measure, based upon historical evidence (it is also the oldest gold stock mutual fund in the U.S.), due to its broad combination of large miners, small miners, and even physical gold. It rose 5.8% during the past week.
The short-term concern (for the bullish case) is that USERX has now risen for 6 consecutive days. A breather is historically likely.
This is a rather short report because the gold stocks have been behaving as expected since the potential major turning point on 12/31/13. The historical expectation continues to be that the gold stocks will rise into the major 92-96 index resistance. That index signal is likely in 4 to X trading days (again, the “X” means that it’s reserved). A failure to generate that index signal would require a decline to new multi-year lows. And when that 92-96 index major resistance signal generates, a decline is strongly predicted. But such a decline would continue the set-up for a real SKI bull market with 100-500% gains. Of-course there’s no certainty that the gold stocks will maintain that bull market set-up, but it’s a rare event that the set-up is even possible; Such set-ups only occur every 2-5 years after protracted declines.
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.