Current USERX price = 15.10, Up 2% 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 2/28/10, I continued to describe how a true SKI bull market opportunity was presenting itself but had not yet been fulfilled. Such opportunities involve the master 92-96 index: True bull market require a buy signal from the master 92-96 index that is On the Path. Such buy signals do not guarantee a bull market (there are false or incorrect buys since 1974 that sell out quickly with a loss), but all bull markets (where the gold stocks rise for about a year to a new level and at least double) have only occurred when the 92-96 index is in control and giving a buy signal. They are rather rare events and since 2000, despite the overall rising trend in the precious metals sector, have only occurred in 2001-2002 and 2005-2006, but those periods accounted for the majority of the rise in the gold stocks over the past ten years.
The last SKI Report also described how the 92-96 index HAD bought on 2/12/10 but had quickly failed and sold the following week, but that the opportunity for the bull market index signal still was alive due to the rise on 2/25-2/26/10. Even more importantly, if the market behaved just “right” an extremely bullish Triple Buy (where the short-term, intermediate-term, and 92-96 indices all bought) was possible over the following 2-3 weeks.
After the last SKI Report, the gold stocks rose and generated another 92-96 index buy signal On the Path that executed on 3/08/10. Jeff’s human judgment, which is more fallible than the empirical indices, but is based upon those indices, suggested that one should refrain from buying that 92-96 index buy signal. Why? There were 2 reasons. First, bull markets also REQUIRE that the intermediate-term trend should be bullish via a 35-39 index buy signal and that index was still in an intermediate-term downtrend since selling in January 2010. Secondly, a 4 Down and 5 Up run pattern had occurred from 2/25-3/03/10. That means that USERX (the gold stock mutual fund) had declined for 4 consecutive days into 2/24/10 and then had risen for 5 consecutive days into 3/03/10. Such a run pattern has been historically definitive: It marks a high until/unless the price after 5 days up is exceeded on a closing basis. In this case, that price was USERX 15.52. But Mechanical SKI had bought for a potential bull market. That day, 3/08/10, started with the gold stocks rising, but then they closed lower (to form a bearish “key reversal down” day), so Mechanical SKI bought at the close (as always) at USERX 15.35, but Jeff refrained from buying.
That day, 3/08/10, marked the exact intra-day high, so far, for the gold stocks in the U.S., whereas the run pattern marked the closing high, to date. I always write that the SKI indices mark the critical points, and they really do, but sometimes the indices can, unfortunately, buy at exact highs or sell at exact lows. But they DO mark the critical points with rather uncanny accuracy.
After that potential bull market buy signal, prices declined in a modest manner until 3/15/10 at USERX 15.02. A small decline for a few more days would have generated a short-term index buy signal (the 16-20 index) AND the awaited 35-39 index buy signal for the Triple Buy that I was describing in the last Report. That would have been SO bullish, but the market didn’t fulfill that pattern because prices rose on 3/16/10 and 3/17/10. That rise avoided the short-term index buy signal (that buys on a decline to oversold conditions), but DID generate the required 35-39 index buy signal that executed this past Friday (3/19/10).
The many year trend turned higher in the Fall of 2008 via a life run pattern low, the multi-year trend turned higher via a true 221 index buy signal in August 2009 (8/18/10), but we’ve been awaiting the final required piece of bullish puzzle, a 92-96 index buy signal. Since the last Report, the gold stocks avoided the extremely bullish Triple Buy pattern, but did generate a Double Buy pattern that completed just this past Friday (3/19/10). Is SKI a raving bull? Mechanical SKI is on its potential bull market 92-96 index buy signal and the 35-39 index has now given its required buy signal, but frankly, the 92-96 index is also ready to quickly fail and sell if prices do not stay above the RISING prices from 92-96 trading days ago. Such a sell signal should end the chances of a true bull market for at least a few months. If the sell signal does not occur, the bull will live!
Jeff’s fallible human judgment says that it will fail and sell SKI and Jeff at a loss this coming week, but since this is such a potentially bullish index buy signal and the sell-stop will be rising this week, Jeff (that’s me) has to remain in synchrony with Mechanical SKI (that is non-emotional but also fallible!) until SKI sells. Since SKI is on buy signals, an immediate rise is also possible.
I sound like I am talking from “both sides of my mouth” as I re-read this. I am. The bullish potential is there, but a rise is required. I also have several very long-term indices that have stopped each rise during 2009 and those indices have executed simultaneous RESISTANCE signals this past Friday (3/19/10). The prior run pattern high of USERX 15.52 has not been exceeded. Therefore, according to Jeff, based upon the SKI index signals, we are exactly at the juncture between a true bull and a continuing correction from the December 2009 highs. SKI is actually best at marking the critical decision junctures of the market, in my opinion, and is always unique, but does lose money via rather quick sells. We will (that is “will”; no hedging here on timing) see this coming week.
Be well, 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.