Special SKI Report #16
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 the most informative gold site, 321gold, since its inception approximately six years ago. 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 32 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 at http://www.skigoldstocks.com/about.php. 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.
Today's Report is DRY and focuses on one of my very long-term indices. Before proceeding, remember that these indices mark critical points. If prices decline into an index "sell" signal that isn't always bearish. It can mark a low. But if an index sells, one knows that it will have to buy back for a bullish phase.
With gold climbing nicely in the past month while the gold stocks meander higher, the bullish phase since May 2005 has lasted long enough for the 218-222 index (named the "221") to be coming back into the technical picture. It's hard to believe that such a long-term index could mark critical points. And although the 221 index may sound similar to a 200-day moving average, it's actually rather different. But just as people write and show how prices eventually fall back to their 220-day moving averages, for SKI, prices eventually come down to the 221 index. We can't be certain if it'll happen soon, but the time appears to be "ripe".
The gold stocks need to rise above their May 2006 highs within the next 24 trading days or the 221 will be selling. If the index is going to sell, prices usually fall rather steeply into the index signal and can mark a low. Note that this isn't a prediction of which way the gold stocks will move: The index will provide information when the signal occurs. The point of this Update is that the time is approaching for this next long-term index signal. It's been 9 months since the May 2006 high and USERX is currently at the same price that it was 10 months ago (current price = 16.21; May 2006 high = 17.96). If you count back 221 trading days from today, you'll see that those May 2006 high prices enter the 221 index in 24 trading days. Essentially, the index will provide interesting information on the state of the precious metals and more specifically, the gold stocks.
For your continued study, the following is the history of the 221 index since 2001 using USERX (the precious metals mutual fund):
Again, prices will need to go to new decade highs over the next 5 weeks in order to avoid this index. Even if that occurs, prices could then decline because the 221 index back prices will be falling from their May 2006 highs. Or prices could begin falling very soon and sell the 221 index out near/at a major low, as has occurred after prior major yearly rises. I've obviously got every base covered (smile), but the point is that the 221 sell signal, whenever it occurs, will probably mark a critical point and begin a new sequence of 221 signals leading into another yearly major bullish phase.
I like to write some personal market reactions because my emotions often appear to mimic the gold stocks' market psychology. This market has driven SKI and Jeff (me) rather nuts since May 2006. I'd just like to get a nice clear index signal. SKI's bull market (from the August 2005 buy signal) ended in early September 2006. I obtained a clear sell signal, prices plunged into early October, and now the gold stocks are basically at the same level as in early September 2005 and April 2006. The one time that SKI obtained a new true bull market buy signal, on 11/28/06 at USERX 16.17, the market eventually reversed and ended that bull chance. Jeff went slightly long there for 2 weeks and sold at no profit before prices really declined into January. And now prices are back up to those same levels again. I really need a trend. Maybe that's why the gold stocks have been rather lethargic: Investors/traders feel like I do and all-the-while gold bullion moves higher...
If you are interested in following and learning more about the state of the 221 index and the other shorter-term SKI indices, I'll write another Report for 321gold in a few 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. 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.