Current USERX price = 14.15, Up 10 cents (.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.
In the last gold stock SKI Report written on Sunday 2/05/12, I described how the gold stocks had risen from the potential long-term low at the end of December 2011 into the second set of resistance index signals and that Jeff had sold his gold stocks (while retaining his core physical gold position). A severe immediate decline would have yielded superb buy signals, but the “the most common outcome would be a period of ‘playing around’ (i.e., down and up and down) over the next month”.
Since that last SKI Report, the gold stocks did decline, as was strongly expected. The HUI index declined for 8 consecutive days, but the decline was not severe. Rather, the decline was rather moderate (6%). The short-term supportive 16-20 index was hit/touched on 2/16/12 and 2/17/12 as the gold stocks manifested a traditionally bullish “key reversal higher” (a lower low than the prior day and a close above the prior day’s high) on Thursday 2/16/12. That “looked like” a possible short-term low and the gold stocks have rebounded back up to around their prior highs attained at the time of the prior bearish SKI Report. In other words, the common outcome of a “down” and then an “up” (as per the 2/05/12 Report) has occurred.
The “common outcome” would therefore call for another decline to occur shortly, but the situation is less clear than it was 3 weeks ago. The SKI indices for USERX have not generated any new index signals over the past 3 weeks. However, the HUI has now risen into its next resistance index, the 92-96 index. That index executed its resistance signal into this past Tuesday’s (2/22/12) rise at HUI 545.78. And that index is within 2 days of generating a sell signal if the HUI has several closes below 540 (it is currently at 541.90). That would be similar to what happened to the HUI’s 221 index in the prior Report (i.e., a rise into a resistance index signal as prices rose over the prices from 218-222 trading days earlier, and then a decline to quickly fall below the index’s back prices). But at the same time, the supportive 16-20 index’s back prices are almost at the prior 2/02/12 highs, so we have immediate index support below the current price during this coming week. Therefore, the gold stocks can certainly avoid declining during this coming week.
Newsletter writers often appear to attempt to foster excitement in their readers by making extreme forecasts. Extreme market movements are rare. Gold bullion has continued to out-perform the gold stocks, and I’ve read quite a few technicians forecasting another strong immediate rise. Gold could certainly rise to test the $1800 level and it is SKI-possible for the gold stocks to rise another 9% into USERX’s next resistance index (the 92-96 index at $15+ over the next 2 weeks). My lack of excitement may be indicative of such an upcoming surge (smile), but I cannot forecast such a surge. Rather the best guess here is for a stabilization and then a decline. The very long-term prognostication continues to be extremely 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.