Current USERX price = 18.88, Up 81 cents (4.5%) since the 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 3/13/11, I described how the rise into 3/04/11 and 3/08/11 had generated the 35-39 index and 92-96 index resistance signals that spurred my sell recommendations and that the gold stocks typically then decline quickly to below the prices from 35-39 and 92-96 trading days earlier. At the time of that SKI Report, the gold stocks had already declined to below the 92-96 index and the two possibilities described were: (1) An immediate rise back above the 92-96 index that would be difficult to accomplish, and (2) A continuing decline that week that would quickly cause prices to also fall below the prices from the prior 16-20 and 35-39 trading days. I had not repurchased the gold stocks sold on 3/04-3/09/11.
The following week (3/14/11 – 3/18/11) yielded the rather strong decline in the gold stocks and the general stock market. I was in the Southern Alps on the South Island of New Zealand and had limited access to the news or anything more than the markets’ closing prices. But it was somewhat pleasant to just use the SKI indices at the end of the day (as they were originally intended and developed to be used) without even being really aware that natural disasters were supposedly affecting the global markets.
That decline yielded signals on all of the indices, marking what the 3/13/11 SKI Report concluded would be a “rather massive critical technical point”. Note how that prior article did not predict and did not indicate whether such a point would be a buying or selling situation. That’s because I do not “know anything” until the indices generate their signals. During the prior month, I had been guessing that the gold stocks would form their next intermediate-term low around 3/15/11 because that was 35-39 trading days (one intermediate-term index cycle) from the 1/25/11 low. I try to guess what index signals are going to occur in advance of the signals, but the actual next prediction only really occurs when the index signal generates.
Another intermediate-term low would be triggered by a decline to below the 35-39 index and then a rise back over the prices from 35-39 trading days earlier. Therefore, SKI first needed the continuing decline during the week of 3/14-3/18/11 to below the 35-39 index. The declines on 3/14/11 and 3/15/11 came very close to generating the 35-39 index sell signal, but SKI still needed a drop on 3/16/11, with USERX closing below 17.19. I include these examples because I am proud of the indices’ delicate precision: USERX closed at 17.17 that day, making it by 2 pennies, and the 35-39 index had generated its signal!
A new buy signal was therefore possible if/when the gold stocks rose back above their prices from 35-39 trading days earlier. On 3/17/11, those back prices included the 1/25/11 low area of 17.44, 17.35, 17.19, 16.92, and 17.42. In fact, the way the indices are computed, the 35-39 index was going to generate a new buy signal as long as USERX didn’t decline on 3/17/11. So when the gold stocks were closing higher on 3/17/11, the buy-alert was sent.
SKI therefore went long again on that 3/17-3/18/11 35-39 index buy signal. Prices are then supposed to rise into the first resistance index, the 16-20 index. After that occurs, the “easy” portion of the rise ends and the gold stocks can either: (1) Continue to rise to the major 92-96 index resistance, or (2) Decline to sell the 35-39 index and stop-out the intermediate-term buy signal. Note that the “New Phase” for the gold stocks that I have been describing since January 2011 is continuing: The rises into index signals mark resistance.
The rise from the 35-39 index was surprisingly powerful and actually hit that first resistance quickly, but the decline early last week generated a little 16-20 index buy signal that executed on 3/29/11 (as the gold stocks fell below their prices from 16-20 trading days earlier). That appears to marked (exactly) a little short-term low, but this coming week we are extremely likely to obtain the short-term index sell signal that will mark the first resistance again (the targeted days for this coming week are reserved for subscribers). I don’t “know” if this coming week’s resistance index signal will be overcome and prices will rise to the 92-96 index resistance over several weeks (where I’ll be doing some selling in expectation of a quick 10%+? decline) or whether the 16-20 index sell signal resistance will be strong enough to start another meaningful decline. But if the gold stocks do decline back below the 35-39 index, that IS the rising stop-gain (sell) signal. I’d love to see the continuing rise over the next few weeks because that would be the first step that is required to set up a true SKI bull market. Even though I’d be predicting an immediate decline at that point, the decline would be the second required step for setting up a true bull market that would finally predict another really powerful rally in the gold stocks ala 1979-1980, 1982-1983, 1992-1993, 2001-2002, and 2005-2006. SKI’s been bullish for the long-term since the 2008 crash, but the rises still have not taken the powerful form of a true SKI bull market and the gold stocks have not really leveraged themselves relative to gold bullion.
P.S. Although New Zealand was spectacular, it’s so nice to be home again with my collar bone almost healed.
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.