Current USERX price = 6.82, Down 71 cents (9.4%) since the last report 4 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.
The last gold stock SKI Report, written on Sunday 3/02/14, concluded that prices had risen into the major 92-96 index resistance signals on 2/13/14 – 2/14/14, that a decline should occur into index sell signals, and that a bull market set-up would occur IF the gold stocks declined over the next X trading days. The “X”, again, always means that the specific time period is reserved for subscribers.
Since that prior Report, the gold stocks went sideways for a week (as gold rose and silver declined). An approximate 10% decline was needed during the week of 3/10/14 to obtain the bull market set-up (via a 92-96 index sell signal and then re-buy it). The gold stocks declined on that Monday and Tuesday (3/10/14 – 3/11/14) and a strong decline on Wednesday (3/12/14) would have maintained the SKI bull market set-up. But the gold stocks rose on that Wednesday and went to a new 2014 high over the next two days. That destroyed the set-up for a bull market.
Although many analysts turned bullish at that point (the “break-out”), nothing could change the SKI forecast for a decline into the 92-96 and/or 35-39 indices. One of the reasons that technical analysts turned bullish was because the gold stocks had risen over their 200-day moving average. I’d warn you for the future, that multi-decade historical analyses indicate that rises over the 200-day moving average typically result in rather immediate declines below the 200-day moving average. In other words, most of the time, buying on a rise over the moving average results in a whipsaw loss. Of-course, sometimes the rise over the 200-day moving average does yield a lengthy bullish rise, but the whipsaws over years will yield losses that equal the gains obtained during the bullish period.
SKI bull markets have been defined as a 92-96 index buy signal that is “leading” or “On the Path of Trades” (see the prior SKI Report). An accompanying required condition is that the long-term 218-222 index (called the “221 index”), should also be on a buy signal. It’s interesting to note that the 221 index appears to correspond to a 200-day moving average. It does NOT. The SKI indices are not moving averages. A 221 index buy signal requires that prices rise over the prices from 218-222 trading days earlier. The 221 index sold on 9/11/2011 and then did not re-buy until 11/01/2012. That buy signal was XXed Out and it was uncertain if it marked the beginning of a long-term bull market, but it then sold quickly on 11/16/2012 and has remained bearish. Most interestingly, the 221 index was hit/touched on 3/06/14 at USERX 7.89. And then, when the gold stocks rose to a new 2014 high on 3/13/14 at USERX 8.03, the 221 index still did NOT buy because its back prices had temporarily risen to USERX 8.18-8.34. It still has not generated its buy signal and its back prices will remain in the USERX 7.29-7.89 area for another 5 weeks. You can check this yourself by looking at the prices from 218-222 trading days ago. And if you can “handle” this type of mathematical detail and precision, you should consider joining SKI.
It’s mathematically impossible for SKI to generate a bull market buy signal: The gold stocks failed during the week of 3/10/14 – 3/13/14 because they ROSE. Here’s an interview from a week ago that describes that failure.
USERX has now fallen the normal 10-15% to hit/touch the 92-96 and 35-39 indices but has not yet generated the index signals. History continues to adamantly predict that the gold stocks WILL generate higher-order index (35-39 and/or 92-96 index) sell signals. The 35-39 index’s back prices are rising, so it’s very likely that the index signal will occur within the next couple of weeks. At that point, the SKI Path of Trades will re-open and SKI would buy on a new buy signal, but there will be two scenarios. The first scenario is that the gold stocks will avoid a new buy signal and decline to the 92-96 index. The 92-96 index’s back prices are descending towards the 2013 low. Therefore, the first scenario will be a rather horrendous decline down to the 92-96 index that tests or exceeds the 2013 low. The alternative scenario is that the gold stocks will go “sideways” or “sideways-to-higher” into multiple index signals to mark lows and highs every few weeks or each month. In other words, the market would go up and down, down and up, in a sideways manner until the 92-96 index’s back prices rise back up into this price area. That could provide a decent trading environment for several-week moves.
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.