Current USERX price = 17.53, Up $1.35 (8.3%) 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.
In the last gold stock SKI Report written on Sunday 5/30/10, I described how the fourth opportunity for a true gold stock bull market had been lost again but that the 3 Up and 6 down run pattern decline into 5/20/10 often historically marked a low, that the subsequent five consecutive daily rises had then historically marked “some type” of high on 5/27/10, but that we had another opportunity for a SKI bull market signal in another 1-1.5 weeks.
That was all correct. You know that I write when SKI is “wrong”, but that was all “correct”.
The correction from the 5/12/10 high appears to have been completed on 6/14/10. The correction in the gold stocks was somewhat different from the correction in gold bullion.
It’s always fairly easy to describe a correction AFTER it has apparently ended. That’s not particularly useful for making money except that if the correction has followed a textbook Elliott Wave technical pattern, the analysis provides some confidence that the correction really has ended.
The gold stocks’ correction WAS a symmetrical triangle. USERX declined for 6 consecutive days from that 5/12/10 high into the 16-20 index buy signal and the 92-96 index sell signal to mark the Wave A low. The 5 consecutive daily rises that followed were supposed to mark a high and actually were Wave B up. Prices then declined to the 35-39 index sell signal on 6/04/10 that was the Wave C low. Prices then rose into the 92-96 index buy signal for a Wave D high on 6/08/10. So all of the run pattern and index signal concerns and interpretations that SKI provided now make sense. The final E Wave decline ended on 6/14/10 via a touch of the 35-39 index and that “key reversal down” day. If you draw a chart line connecting the 5/12/10 high and the 6/08/10 high for the downtrend top of the triangle, and then draw a line connecting the lows on 5/21/10 and 6/04/10, you can see that the rise on 6/15/10 broke out over the top of the symmetrical ABCDE classic triangle for a breakout (see http://stockcharts.com/h-sc/ui?s=GDX&p=D&b=5&g=0&id=p92504022081).
The gold bullion correction (by looking at GLD) was also a triangle, but it was an Ascending Triangle with a flat top and rising bottoms. The Ascending Triangle wasn’t “just right” because it appears to be missing one wave. The decline from the 5/12/10 high to the 16-20 and 92-96 index signals was again Wave A down at GLD 114.51. The rise into the 92-96 index buy signal on 6/08/10 was a Wave B high at 122.45. The key reversal down day to touch the 35-39 index on 6/14/10 was a Wave C low at 118.83, and the rise into the 16-20 index sell signal on 6/17/10 looked to be a Wave D high. It appeared that we needed a 1-2 day decline to complete the triangle via an E Wave down. Instead, prices gapped higher on Friday (6/18/10) and that was strange. It leads to the possibility that prices will have an immediate short-term decline back into the triangle, hitting the up-trend support line connecting the two lows to form the missing Wave E at about GLD 121, but that may be wishful thinking from someone who wants to buy more (see: http://stockcharts.com/h-sc/ui?s=GDX&p=D&b=5&g=0&id=p92504022081).
SKI went back to another potential bull market buy signal when the master 92-96 index buy signal generated on 6/07/10. Moreover, the 35-39 index generated its buy signal the next day for a potentially very bullish Double Buy index pattern that has historically yielded large and extended rises in the gold stocks and gold bullion. The triangular corrections detailed above also appear to have ended as the goldies gapped higher this past week.
Last week’s rise brought prices back into SKI short-term index sell signals. The triangular correction in gold bullion also appeared to be missing one last small wave down. Therefore, the caveat (isn’t there always a short-term “caveat”?) is that even if prices rise tomorrow, there’s the likelihood of a pullback for a few days. But we did have another index pattern that is quite bullish and prices did fly higher last week. In the longer-term sense, SKI has been bullish since the Fall of 2008 and then obtained another long-term bullish index signal on 8/18/2009. The really big bull has been awaiting the final piece of the puzzle: The valid 92-96 index buy signal. We’d obtained several of those during the first part of 2010 that had all failed, but the market generated another one 2 weeks ago. Prices can “play around” over the next week, even if prices rise tomorrow. There still is one more level of long-term resistance (the 663 index) that lies above us, but it’s all continuingly SKI-bullish. If/when the gold stocks can break through that last level, which has repeatedly marked the major highs of the past 1.5 years, the gold stocks should really take off. This bullishness comes from SKI that turned long-term bearish in May 2006 and renewed bearishness at the exact March 2008 highs before turning long-term bullish on 9/11/2008.
Although the summer time is often a bearish period for the precious metals and the gold stocks, that is NOT always the case! Of-course there is a stop-loss in place for the short to intermediate-term, but the long-term continues to be bullish.
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.