Current USERX price = 7.44, Down 5 cents (.7%) 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 5/26/13, described how the gold stocks (USERX and HUI) had executed high probability 16-20 index buy signals on 5/16/13 and 5/17/13. If the index buy signals were correct, a meaningful rise was supposed to occur into the next critical technical point at 16-20 trading days after the buy signals.
The rise occurred and hit/touched the 16-20 index resistance on 6/03/13 as USERX rose to 7.95. That was when the 16-20 index’s lowest back price was exactly 7.95. Yes, a further rise could have occurred, but the gold stocks then began to behave in a bearish manner once again.
Prices fell for one day on 6/04/13 and then rose for 2 consecutive trading days into 6/06/13 at a lower high for USERX at 7.89. The HUI’s 16-20 index executed a sell signal on that day and then a 16-20 index buy signal on the next day as the rise appeared to fail (it wasn’t a large enough rise on 6/06/13). When the index buy signal occurs immediately/instantly after the sell signal, the buy signal is usually incorrect/bearish. Therefore, Jeff sent the Intra-Week Sell Update early in the morning of 6/07/13 as gold (GLD) was gapping down below chart trend-line support. The expectation was that the 16-20 index buy signal had yielded a rise, but that it was in the process of failing (yet again). Prices were expected to decline during this past week and they did.
When SKI generates a 16-20 index buy signal, the gold stocks are supposed to rise for 16-20 trading days into a 16-20 index sell signal. This past Friday (6/14/13) was 20 trading days from the 5/16/13 buy signal. If the gold stocks had just risen .7% on Friday, the index sell signal still would have occurred at the last moment. Unfortunately (for the bullish case), the gold stocks declined on Friday and avoided fulfilling the prediction from the 5/16/13 index buy signal. Such a 16-20 index sell signal is needed for the bullish case because if prices then decline, Mechanical SKI would simply generate another bullish 16-20 index buy signal (i.e., there would be support below the market). Yes, just a small/specific rise during this coming week would do the trick, but Friday WAS the 20th trading day from the index signal. Therefore, the bullish failure is more likely, especially after having hit the 16-20 index resistance at the exact 6/03/13 high and hitting 35-39 index resistance on 6/06/13, coupled with a typically bearish 1 Down and 2 Up run pattern.
Chartists and analysts, including myself, can easily perceive that the gold stocks may be forming a potentially bullish Head and Shoulders bottoming pattern. The left shoulder was on 4/17/13, the head occurred as Mechanical SKI was buying on 5/17/13, and the current price decline would be forming the right shoulder of this common bottoming pattern. A quick rise this coming week would still generate the required 16-20 index sell signal (albeit strangely “late”) and the gold stocks continue to be oversold on a longer-term time frame, Furthermore, the HUI’s 16-20 index DID sell on 6/06/13 and again on 6/12/13, so it WILL generate a buy signal on a decline. Nonetheless, all trends (except the extremely long-term trend) remain down and yet another leg down can easily occur in short order. For the third time since the very bearish 1/23/13 Double Sell index pattern, Jeff has to warn of “Danger”. It’s reasonable/understandable for folks who’ve bought in the last few months to execute their sell-stops on a break-down of the 2013 (annual) gold stock lows. For USERX, that’s 2+% lower at 7.29….
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.