Current USERX price = 7.49, Down 73 cents (8.8%) 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 5/05/13, described how the gold stocks were likely to hit/touch the 16-20 index’s resistance within the subsequent 2-7 trading days. That index’s resistance had stopped every rise since the September 2012 high. Nonetheless, the actual generation of the index sell signal would be important because the index could then provide a new 16-20 index buy signal on the next decline.
After that 5/05/13 Report, the gold stocks declined for two trading days and then surged 3+% on 5/08/13 to hit/touch USERX’s and HUI’s resistance index, as expected, at USERX 8.21 and HUI 286.80. The gold stocks then began an immediate, continuous, and significant decline.
Here are the relevant excerpts from the weekend SKI Update on 5/11/13:
USERX then declined to close at 7.94 on Monday, 5/13/13. IT HAD HELD BY ONE PENNY (SKI-perfect) to generate the actual index sell signal. The next important issue was whether the sell signal would be immediately followed by the buy signal. If that occurred, the sell and buy signals would be “juxtaposed” to invalidate the buy signal.
In order to avoid the bearish juxtaposed buy signal, USERX needed to close above 7.81 on the next day, Tuesday 5/14/13. On 5/14/13, USERX declined to close at 7.82. It had held up again by the proverbial “one-penny” to avoid the juxtaposed index buy signal (SKI-perfect again). The gold stocks then plunged to new 2013 lows on Wednesday, the run down extended to four consecutive days, and the generation of the 16-20 index buy signal caused Jeff to send the 5/14/13 Intra-Week Update (in addition to the daily SKI Messages). Here is the most relevant excerpt from that 5/14/13 Update:
“The gold stocks have behaved exactly as per the Weekend Update. Note that such perfection does not guarantee that this buy signal will be "correct". If this buy signal fails (as discussed below), it will likely be an "Armageddon #3" that is even larger than the prior two Armageddon declines. USERX needed to stay over 7.93 this past Monday and it closed at 7.94. That generated the expected 16-20 index sell signal. Then yesterday (5/14/13), USERX needed to remain above 7.81 to avoid a juxtaposed/immediate 16-20 index buy signal. So USERX closed yesterday on the perfect 1-penny spot at 7.82. Then today, USERX and HUI needed to decline to new 2013 lows to generate the index buy signals. Voila! Again, exactly as Jeff had expected as per the daily messages this week, but that does not "guarantee" the accuracy of the buy signal. The USERX 16-20 index has generated its Mechanical SKI buy signal today for execution tomorrow. The USERX 15-19 index and the HUI's 16-20 index will generate their buy signals tomorrow for execution on Friday. THEREFORE THE INDICES ARE MARKING TOMORROW (5/16/13) AND FRIDAY (5/17/13) AS THE POTENTIAL/LIKELY LOWS.”
The high probability index buy signals executed on 5/16/13 and for 5/17/13. If the index buy signals are correct, a meaningful rise is supposed to occur into the next critical technical point at 16-20 trading days after the buy signals. The rise to-date has been muted and some gold stock measures (e.g., GDX) have had their rise stopped almost exactly at the open down-gap from 5/14/13. USERX has also completed a generally bearish (but only a 75% historical probability) 1 Down and 2 Up run pattern into the end of this past week. Therefore, it’s once again important to have stops in place. There is a time stop and a price stop that are reserved for subscribers. A break of the existing buy signal should initiate “Armageddon #3”. I would also note that when Silver manifested a Death Run top in 2011, the 321gold SKI Update reported that the expected decline, if such Death Runs were valid for SLV, yielded a minimum downside target over 1.5+ years of $20. It’s been 2 years and Silver basically hit that target this past week at $20.25. That does not mean THE bottom has completed because SLV did not manifest a Life Run low run pattern, but such Life Runs cannot be validated in SLV due to its limited history. Nonetheless, it does “fit with” the current and precarious SKI buy signal from 5/16/13-5/17/13.
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.