Current USERX price = 8.22, Down another $1.22 cents (13%) 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.
The last gold stock SKI Report, written on Sunday 4/07/13, described how SKI had generated a mechanical 16-20 index buy signal and had bought. It concluded that prices were supposed to rise into the next SKI Report, but if prices did not rise and this buy signal failed, the gold stocks should experience another large decline in an “Armageddon #2”.
After that 4/07/13 Report, the gold stocks rose for a couple of days and then began to fade. The gold stocks fell below the 16-20 index’s buy-in price on 4/11/13 and that day’s SKI Message warned that it was time to sell if the gold stocks were falling below the prior low from 4/03/13 at USERX 9.17 and HUI 317.42.
Such a decline to new lows occurred the next day. On Friday, 4/12/13, the gold stocks gapped lower, falling to new 2013 lows, and the SKI 16-20 index buy signal was broken to the downside. That was the rather historic day that gold dropped below the $1525-1540 support area that had held for 1.5 years. COMEX gold closed at $1501, and it’s a rather ominous technical sign when gold drops to close slightly ABOVE a big round number. By the end of that Friday, gold had dropped to close the week at $1476 and then there was the historic plunge on the next Monday. That $1476, by the way, is the resistance that is currently being encountered as folks who refused to sell on the one-day plunge from $1476 to $1321 are now using the recent rebound to sell.
I use the term “Armageddon” to describe declines through/below 16-20 index buy signals. “Armageddon #1” had occurred in January 2013 when USERX fell through a 16-20 index buy signal. That decline was expected because the 16-20 index was XXed Out (meaning that it came immediately after a higher-order, 92-96 index sell signal, and a continuing decline has an 80% historical probability). The history of these Armageddon-type declines is that prices decline between 11-33% over 16-36 trading days. Armageddon #1 declined 14.5% over 23 trading days (i.e., from the XXed Out 16-20 index buy signal on 1/29/13 at USERX 11.08, to the low on 3/04/13 at USERX 9.47).
The current “Armageddon #2” is measured from the 16-20 index buy signal on 4/05/13 at USERX 9.42. The low-to-date was on 4/17/13 at USERX 7.67. The maximum decline during this Armageddon #2 reached 18.6%. Therefore, the decline did reach the normal historical magnitude for Armageddon-type declines. However, that low occurred just 8 trading days into the Armageddon time period. If that was THE low for that decline, it will have occurred in the shortest time period ever seen. Yes, that’s possible because it was a strong decline, but the historical time period for Armageddon-type declines suggests that a lower low can still occur within the next approximately 16 trading days.
More importantly, the anemic rise from that 4/17/13 low-to-date has burned up enough time to bring the 16-20 index back into the picture. That’s because this SKI Report is actually one week late! I apparently was so preoccupied with the gold crash that I didn’t realize last weekend that it was time to write another SKI Report for 321gold! In any case, if you look back 16-20 trading days, you’ll see that the 16-20 index resistance will be hit/touched again in just 2 trading days if USERX remains above 8.01 (HUI 272.93). The index will generate its next sell signal in 6 trading days if USERX is above 8.01.
The 16-20 index resistance has stopped every rise since the September 2012 high. On some occasions, the gold stocks have only risen enough to hit/touch that index resistance to mark a high and have then declined to avoid generating the actual index signal. The actual generation of the index sell signal is important because the index can then provide a 16-20 index buy signal on a decline. Such a 16-20 index buy signal has a strong historical of marking a low unless it is XXed Out. The January 2013 16-20 index buy signal WAS XXed Out and provided the useful projection for an Armageddon-type decline. This recent 4/05/13 16-20 index buy signal was NOT XXed Out and it was historically rare for the gold stocks to have broken through/below that buy signal, but that broken buy signal still provided the immediate projection for the Armageddon #2 that continued.
Now, all trends (except for the very long-term) remain down, with the most recent gold stock high occurring on 4/25/13 at USERX 8.36. We’ll get to see how the gold stocks react to the 16-20 index in the next 2-7 trading days. If the gold stocks can hold up enough to generate the index sell signal, a decline would generate yet another Mechanical SKI 16-20 index buy signal. A rise through a 16-20 index sell signal would break the pattern since the September 2012 high. But as “everyone” says, “Gold now has that very formidable/large resistance in the $1525-1540 (the break-down point)”, and as I mentioned above, there’s the resistance that starts at $1476+ as well.
The recent plunge in gold and the persistent decline in the gold stocks have caused most folks (including Jeff) to have concerns as to whether the very long-term trend has been down for the past 1.5+ years and will persist downward over multiple years. There were the 2011 Death Run tops in Silver (SLV) and GDXJ at exact highs that projected multi-year declines, but we’re still wondering whether those multi-year bearish run patterns require a crash into a life Run low run pattern. If USERX had manifested those 2 days Up and 5+ CRASH days Down to a form a Death Run top, we’d still expect/predict a crash Life Run low to form the multi-year low soon. But USERX never provided a Death Run top and the 2008 USERX Life Run low continues to project very long-term bullishness….
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.