Current USERX price = 6.37, Down 21 cents (3.2%) 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 5/11/14, concluded that the trend was still down, but otherwise was inconclusive: The two scenarios since SKI turned bearish via a resistance 92-96 index “buy” signal in late February were both still viable. Scenario #1 was a rather horrendous decline to the 92-96 index below the December 2013 low. Scenario #2 was a sideways down-and-up-and-down-and-up period until the 92-96 index sold. In either case, the market was supposed to (based upon the past 40 years of historical analysis) get down to the 92-96 index. The gold stocks HAD just generated a 221 index buy signal on 5/09/14 at USERX 6.58 for potential bullishness, but the index could easily sell within 2 weeks of its buy signal for continuing bearishness. Furthermore, any bullish case required a rise to the first resistance 16-20 index sell signal (because then, a decline would generate a bullish 16-20 index buy signal).
That was all “correct”. The gold stocks rose a little but just missed generating the 16-20 index sell signal on 5/14/14 when USERX rose to 6.70. The 16-20 index’s back prices on that day were 6.74, 6.68, 6.60, 6.51, and 6.59. Had the gold stocks held up for just one more day, the index signal would have generated and any subsequent brief decline would have turned SKI bullish. But the gold stocks declined the next day, with USERX dropping to 6.61. And that declined continued, thereby avoiding the index signal that is required for any meaningful bullishness case.
The decline into 5/19/14 then generated the 221 index’s sell signal. As the last SKI Report stated, these 221 index buy signals usually either sell within 2-10 trading days of the buy signal at a loss for continuing bearishness, or the 221 index remains on its buy signal for a number of bullish years. This time, not surprisingly, it sold 8 trading days after its buy signal at a 1% loss.
And this past week’s decline immediately went down to the 92-96 index, as expected. There still weren’t any surprises. Last Tuesday’s large decline carried USERX down to 6.34, The 92-96 index’s back prices on that day were 6.09, 6.04, 5.96, 6.09, and 6.29. Therefore, the gold stocks just missed reaching the 92-96 index (the downside target since late February 2013). But Wednesday’s (5/28/13) continuing decline to USERX 6.27 DID hit/touch the 92-96 index’s rising back prices that were 6.04, 5.96, 6.07, 6.29, and 6.24. The next day, the index was adding in a back price of 6.31 and removing the 6.04 back price. Surprisingly, USERX rose that next day (5/29/14) to close at 6.32, thereby going back above the index’s back prices by 1-penny. And then, despite a continuing decline in gold bullion, the gold stocks rose again on this past Friday (5/30/14) to remain above the index’s rising back prices.
I don’t know how many people are even reading these free Reports any more. Subjectively, it appears that most folks are asleep, have “given up” on this sector and are simply expecting a further decline, or expect the widely touted seasonal bearish or “flat” tendencies to play out this summer. I have known the seasonal charts for decades and they have no impact on my observations or investments in the precious metals’ sector. For example, haven’t the gold stocks and gold had solid rises during each of three past summers despite being in a multi-year decline?
USERX’s behavior in the past 2 trading days WAS surprising. I had been expecting a “horrendous decline” if the 221 index sold and prices then declined (as occurred early last week). But the last couple of days provided the very real possibility that USERX will avoid selling the 92-96 index until after a rise and that a 1-year major Head & Shoulders bottom has been completed as USERX has fallen EXACTLY to its Right Shoulder bottom: The Left Shoulder was at USERX 6.27 in June 2013, the Head was at USERX 5.70 at the December 2013 low, and now USERX has fallen back to 6.27 with a variety of bullish indications. Jeff’s just waiting for some objective bullish index confirmation that the final bottom is in….
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.