Current USERX price = 5.90, Up another 8 cents (1.3%) 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 5/03/15, wasn’t particularly enthusiastic for either the bullish or the bearish case. The gold stocks had risen into a 35-39 index buy signal that executed on 4/29/15 at USERX 5.94, but such buy signals don’t have a resoundingly bullish history and can mark almost exact highs. And the bearish Double Sell index pattern that had executed on 4/07/15 had continued to miss the high in gold bullion by one day (despite the gold stocks rising above that prior high).
Since the 5/03/15 SKI Report, there haven’t been any USERX index signals (not surprisingly) because the gold stocks have simply meandered down and up a few percent. Therefore, short-term predictions have been based upon USERX run patterns and “divergences” between the gold stocks and gold bullion.
USERX generated a slightly important 2 Down and 5 Up run pattern from the 2 days down into 5/06/15 at 5.79 into the 5 days up on 5/13/15 at 6.04. It was a “weak” run higher that averaged a gain of only .9% per day. But it did surpass the 35-39 index’s buy-in price of 5.94. Such runs have an approximate 80% historical probability of marking a high. The question was and still is, “How significant of a high?”. Since the run higher was weak, the importance of that high isn’t as clear as a “strong” 2+% per day run higher.
As USERX was making the 2 down and 5 Up run pattern, gold was also rising. In fact, NY COMEX gold (current month) rose for 5 consecutive days into 5/18/15. NOTE THAT DURING THE LAST 3 DAYS OF THAT GOLD RUN HIGHER, USERX DECLINED EACH DAY. That constituted 3 consecutive short-term bearish “negative divergences” whereby gold rose while USERX declined. Such gold runs only become meaningful at 5 or more daily rises and usually end at 5-6 days up.
The USERX and gold run patterns, as well as the negative divergences between gold and the gold stocks became pronounced to the bearish side on 5/13/15-5/15/15. Therefore, last week’s decline was expected. The more important intermediate-term and even long-term trend possibilities have not been clarified by the market’s behavior since the last SKI Report: It is still possible that the long-term trend turned higher on the 12/16/2014 index and run pattern buy signals, but the indices have not generated a bull market buy signal.
As this 3-day holiday weekend ends, a significant turn becomes more likely. Mechanical SKI remains on its 35-39 index buy signal, but that is definitively NOT a bull market. A bull market requires that SKI be on a 92-96 index buy signal. That index does have the opportunity to sell and re-buy for a potential bull market over the next several weeks because (if you look back 92-96 trading days) its back prices are about to rise and PEAK in the USERX 5.95 – 6.22 area during the next 2 weeks (as of this Tuesday, the 92-96 index’s back prices will be from 1/06/2015 – 1/12/15). If USERX can stay below those back prices to sell the 92-96 index (almost always on a decline) and then re-buy the index as its back prices subsequently decline, we do have the potential for a long-term rise. As of now, that has NOT happened. And, as per the report from 3 weeks ago, it’s the sell-stop that matters here.
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.