Current USERX price = 6.58, Down 2 cents (.3%) 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 4/19/14, concluded that “the trend remains down”. The Report focused on the SKI Index signals that would be the first signs that the downtrend was ending: (1) A rise above the prices from 16-20 trading earlier for a 16-20 index RESISTANCE sell signal and then a decline to a 16-20 index buy signal, and (2) Remaining above the prices from 218-222 trading days earlier that would generate a long-term 221 index buy signal.
Since that last report, the gold stocks have essentially been unchanged. One subjective positive sign is that the market has been “quiet” and investors appear to have lost interest. Objectively, the gold stocks DID rise enough into 4/29/14 and 5/05/14 to generate the needed 16-20 index sell signals for USERX and the HUI, respectively. That meant, as per the prior SKI Report, that a decline could generate a bullish 16-20 index buy signal. Unfortunately for the bullish case, the resistance index sell signals yielded an instant decline that immediately generated the USERX and HUI 16-20 index buy signals. The buy signals occurred the day after the sell signals. That is the only index pattern (rare) that is NOT short-term bullish. Hence, the gold stocks have continued to decline into today’s SKI Report.
However, the second sign for bullishness DID generate: The long-term 221 index buy signal has executed right here. For educational purposes, look back 218-222 trading days and see how that is 6/21/2013 – 6/27/2013, an important low for the precious metals sector. USERX is just slightly above that low. Therefore, the 221 index buy signal has generated. The 221 index buy signal provides for long-term bullish possibilities and needs to remain on its buy signal for any really bullish scenario.
This is the third 221 index buy signal during the past approximately 4 years. These 221 index buy signals usually either sell quickly (within 2-10 trading days after buying) OR the buy signal remains in effect for several years. The last two buy signals each failed rather quickly: The last 221 buy signal occurred on 11/02/2012 and sold on 11/16/12 and the prior buy signal executed on 9/09/2011 and then sold quickly on 9/14/11. We know what happened after those two sell signals: Long-term large declines. A similar result would be expected here if the index sells. Additional details are reserved for SKIers.
Since SKI turned intermediate-term bearish 2 months ago, there have been two potential scenarios: (Scenario #1) A continuing rather horrendous decline to the 92-96 index at/below the 2013 lows, or (Scenario #2) A sideways down-and-up-and-down-and-up period until the 92-96 index sells. In other words, the upside appeared to be much more limited than the potential downside. Those two different scenarios still have not resolved, each scenario is still SKI-feasible, and the trend remains down. Therefore, this conclusions section continues to contain “if” statements.
It’s difficult for Jeff to see this uncertainty continue for more than another two weeks. We are at the cyclical time period for a 221 index low (the June 2013 low) AND we are 92-96 trading days from the December 2013 low. Now that we’ve obtained a 221 index buy signal, that index needs to remain on its buy signal to maintain a multi-year bullish opportunity. A sell signal, that is easily possible within the next 2 weeks, would be bearish. But if the gold stocks can rise just a few percent in the short-term to generate another 16-20 index resistance sell signal and then decline a few percent in the short-term (continuing the sideways up-down-up-down), the 16-20 index will generate a buy signal that IS executable. A one-year bottoming pattern would then be likely to have been completed because the 221 index is now on a buy signal.
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.