Current USERX price = 14.77, Up a little 3.1% 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 2/07/10, I emphatically described how the master 92-96 index was coming into the picture and while the rise in the precious metals sector since the 2008 bottom was nice, a true bull market required (yes, “required”) a buy signal from the master 92-96 index. The last 92-96 index buy signal lasted from 2005 to 2006. Where have the gold stocks gone since May 2006? Basically, they have gone “nowhere” and should not “go” without a 92-96 index buy signal. That doesn’t just require that prices rise above the 92-96 index back prices (which the gold stocks did on 2/20/09 to mark the exact high in gold for 6 months). The buy signal needs to be On the SKI Path and not XXed Out. Sounds like foreign language voodoo, no? Nah, it IS SKI and it’s supposed to reflect the basic structure of the gold stock market (and gold/silver bullion to a slightly lesser degree). The “Path” and the “XXing Out” are described in the free section of the website in the Technical Description section of http://www.skigoldstocks.com/about.php.
There are the “Great C-Wave Down” analysts forecasting general stock market devastation. Those folks usually forecast an accompanying decline in the goldies, but some say that the goldies will skyrocket even as the general stock market declines. Frankly, I don’t know. But what I am supposed to “know” is that if the 92-96 index gives a buy signal On the Path, the gold stocks and the bullion can finally go up to new levels and stay there, rising for at least 6-18 months after the true buy signal with historical gains of between 50-500%.
In the last 321gold Report, I wrote that for SKI “the many-year trend turned up on 9/11/08 via a life run low after turning bearish in May 2006, and the multi-year trend turned bullish on 8/18/09 via a long-term 221 index buy signal after turning bearish on 7/29/08. But the really large and continuous rises occur during “true bull markets” marked by 92-96 index buy signals”. And 3 weekends ago we were in a situation where the 92-96 index was ready to “get back into-the picture” for the true bull market opportunity (what most of us desire). This time period is one of those opportunities (or failures) that only occur every few years, with the last one being the gold stock bull market of 2005-May 2006. The opportunity is for 100+% gains over 6-18 months. But the opportunity had not yet been fulfilled.
At the time of the last Update, prices HAD bottomed on 2/04-2/05/10 and a 92-96 index buy signal that WAS On the Path was going to occur if prices rose a little more. On the Monday after that Update (on 2/08/10), the gold stocks declined, with USERX dropping 2.5% and closing at 14.02. The 92-96 index back prices on that date were 14.49, 14.82, 14.56, 14.09, and 14.01. Therefore, the decline held by one penny over the lowest back price and continued to move the 92-96 index towards a buy signal! (The exclamation point means that I get excited when prices often fail or succeed by one penny relative to the SKI Indices). The gold stocks then rose for a couple of days and the 92-96 index buy signal was generated on 2/11/10 and executed (we bought) the next day on 2/12/10 at USERX 14.64. So the long-term trend was higher and the short-term (16-20 index) trend was higher, but the intermediate-term trend (the 35-39 index) was still on its January 2009 sell signal (described in the last Update).
If this was really the start of the SKI “true bull market”, prices needed to rise rather strongly after the 92-96 index buy signal to also turn the intermediate-term trend UP (the 35-39 index). Prices rose about 3% on the day after the buy signal and hit/touched the 35-39 index, then prices fell for a day, and then the gold stocks (USERX) rose again to hit the 35-39 index. On 2/18/10, USERX closed at 15.13 and the 35-39 index back prices were 15.12, 15.13, 15.54, 15.64, and 15.67. The 35-39 index was close to giving its buy signal, but alas, that resistance held and the gold stocks declined on Friday (2/19/10). The USERX closing price of 14.96 on 2/19/10 was below two of the five 92-96 index back prices of 13.98, 13.93, 14.22, 14.97, and 15.02. That did not look good because the 92-96 index was now moving towards a sell signal and the intermediate-term 35-39 index had not generated its buy signal.
So Jeff sent the Sell Update and sold on Monday 2/22/10 at USERX 14.81. I netted an amazingly huge profit of 1%. And then prices did go down to sell the 92-96 index during this past week, selling on the 2/25/10 rise. The SKI true bull market opportunity had been killed, at least TEMPORARILY.
SKI is in cash. The 92-96 index buy that was approaching at the time of the 2/07/10 Update did occur, but it sold last week. That rare true bull market opportunity failed. Furthermore, the gold stocks needed to rise last Thursday (2/25/10) or SKI would have actually turned bearish. On Thursday morning, almost everything was “crashing” in the morning, but then the gold stocks reversed and closed solidly higher, leading many analysts to become bullish. Most importantly, Thursday’s reversal higher prevented SKI from confirming a rather bearish situation, but SKI is in cash.
And now comes the “big news”. Last Thursday’s (2/25/10) reversal kept alive the possibility of another true SKI bull market 92-96 index buy signal opportunity! And this possibility includes the most powerfully bullish pattern of index signals that SKI can generate: A Triple Buy. A Triple buy involves almost simultaneous short-term (16-20 index), long-term (92-96 index), and intermediate-term (35-39 index) buy signals. Essentially, all of the cycles turn up almost simultaneously. Google “SKI Triple Buy” and read the article from the last Triple Buy that nailed the exact low on 12/02/2002. Yes, it was 2002. These are very rare patterns and are supposed to be powerful patterns. Its inverse, the bearish Triple Sell, first occurred at a high in 1980 when all three indices sold on the exact same day, and you know what happened for the long-term after that index pattern. Now the opposite can (not “will) occur within the next 12-13 trading days! If SKI does not obtain the new 92-96 index buy signal within that time period, the gold stocks are likely to get “ugly” (probably along with “everything else”), but since the true 92-96 index buy signal is the last missing piece of the bullish puzzle from the 2008 life run low and the August 2009 multi-year bullish 221 index buy signal, perhaps we’ll get the next Triple Buy! Prices will need to follow a rather exact pattern over these next several weeks and Jeff is getting excited! This continues to be a most serious period for the gold stocks. These types of possible index patterns are rare opportunities. We’ll soon see if the opportunity reaches fruition and actually gives the index signals.
Best wishes, excited 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.