Current USERX price = 19.45 [corrected], Up 11.4% since the last report 3 weeks ago.
Introduction (repeated from prior Reports):
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
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 on 2/17/08, I described how the SKI indices had generated an historic number of index signals, but I was constrained from describing their implications for the precious metals and stocks because the signals had just been executed a few days earlier. Since 3 weeks have passed and the gold stocks have risen 11.4% while gold has risen about $65 and silver has exploded, it should be okay with my subscribers if I publicly disclose that those buy signals were among the most powerful SKI signals ever generated (since 1974).
The indices (that my colleague and I discovered in 1985) provide a relatively conservative "system" that usually does not buy and sell frequently. The actual buys and sells are displayed in the free preview section of my website, with new previews only being added months after they have been initiated. The beauty of the indices (in my biased opinion) is that they provide such high probability signals. In other words, the market can go up without SKI buying, but when SKI buys, the probability is so high that the market will rise (i.e., there are few false positives/buys and if SKI is wrong, the loss is small but still painful). If SKI caught every rise, I'd own the world; SKI will always miss some rises. I've previously described how SKI bought the exact late June 2007 low and sold a few weeks later (before that terrible July to mid-August crash) but then did not buy the August 2007 low. People screamed at me, but I wait for SKI to buy. You may know/recall that I personally put all of my non-retirement funds into gold stocks when I get a true buy signal or else I simply sit in cash because the only thing that I can predict are gold stocks and gold! I had to wait until 3.5 weeks ago and then SKI makes me money. It takes a significant amount of patience and discipline.
But even better than the above point, is the fact that when the mechanical index buy occurs, the index usually also provides a mechanical stop that changes every day. That's why I titled this article "Relaxing SKI Buy Signals". It's been a relaxing 3 weeks.
The index bought a little over 3 weeks ago and if the market had not simply risen almost every day, the 92-96 index would have sold and stopped us out. That would have been extremely bearish (and still could be over the next 11 trading days). Usually, the market simply "rides" the index higher. The 92-96 index compares today's price with prices from 96, 95, 94, 93, and 92 trading days earlier. On Friday, 2/15/08, (the weekend that I wrote that last Special Report for 321gold; and only for 321gold; and I also don't advertise) USERX closed at 17.46. The next trading day, the prices from 92-96 trading days ago rose to include a USERX price of 17.76. I therefore had to expect/predict that USERX would rise over that 17.76 on that next trading day (it rose to 17.92 as gold rose $20). Every day the index back prices were rising and each day the current price jumped over the index back price, sometimes by just one little penny. For example, on 2/26/08, the 92-96 index brought in the price of 18.86 and USERX rose that day to 18.87. I cannot explain how or why nature (the gold stock market) and/or the indices work so exactly.
Last Tuesday (3/04/08), as the gold stocks and gold were being pummeled lower (after gold had risen for five consecutive days and had a 98% probability of having a down day), the 92-96 index was up to USERX 19.34. Where did USERX fall to on that day? 19.35! STAYING BULLISH. I could relax throughout the high intra-day volatility over the past 3 weeks because the stop just kept rising. If it got hit, SKI would sell and I'd have gone to cash or gone short. AND THE STOP KEEPS RISING FOR THE NEXT 11 TRADING DAYS (except for this coming Monday, 3/10/08). The prediction has to be that USERX will hit new century highs (over 20.84) in 9-11 trading days from now and probably will do it on that 11th day. You may recall that its price was decreased by a highly unusual dividend of $2.43 on 12/20/08 and SKI does not know or care about how dividends affect the price; the price IS the price. SKI is very bullish with a rising (and relaxing) stop.
If you are interested in following and learning more about the SKI indices, I'll write another Report for 321gold 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. 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.