Current USERX price = 5.72, Down 18 cents (3%) since the last report 5 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 5/24/15, described the 80% bearish probability run pattern for USERX at 2 Down and 5 Up into 5/13/15 and the bearish divergences as gold rose for five consecutive days into 5/18/15. But the longer-term issue had not been resolved because the long-term trend could have turned bullish on the 12/16/2014 index and run pattern buy signals at the exact USERX multi-year low of 4.82.
I’ve been writing these free Updates every three weeks. This one is two weeks late! Frankly, for the first time in at least a decade, I forgot to write a SKI Update for 321gold. Perhaps that’s because the gold stocks were displaying such low volatility. My apologies.
Since that last Update 5 weeks ago, the gold stocks simply declined in a gradual manner. USERX declined into a 92-96 index sell signal on 6/04/15. That stopped out any remaining long positions. And the HUI has been below all of its SKI indices since 5/28/15. Therefore, the 5/13/15 USERX run pattern did mark its exact high and the 5/18/15 gold run pattern also marked its exact high-to-date.
The important information is that USERX has now declined into its final index signal (notice how USERX has been declining less than the HUI). The USERX 35-39 index sell signal generated last Monday to mark last Tuesday (6/16/15) as a technical point. Of-course, you may not have needed a SKI index to surmise that the day before a U.S. Federal Reserve announcement can be a technical point, but the indices keep doing what they have done for the past 40 years. The 35-39 index sell signal had (and still has) a 40% probability of marking a low. The gold stocks immediately rallied after that index signal, so there remains that 40% probability of last Tuesday being a meaningful exact low.
The 2-day rally from the index signal was sufficient to hit/touch the resistance 16-20 index, hit/touch the 35-39 index, and come within one day of hitting/touching the master 92-96 index. The 92-96 index added in a new low back price of USERX 5.73 on Friday, as the index’s price is declining from the January 2015 high, but USERX avoided the index by declining to 5.72 on Friday.
With all of the indices back into “play”, the meandering that has lasted for a few months (and was not surprising if you reread prior Updates), is now more likely to end. SKI remains in cash and this Update is not going to conclude with a clear “call”. There remains the 60% probability that the gold stocks will simply continue lower now. But almost any rise during this coming week and or the following week is likely to generate MULTIPLE index signals. And if the gold stocks do rise here (even just a little), the outcome (the “call”) should depend on the exact order of index signals. For example, since the 92-96 index’s back prices are declining, that index could buy first for potential bullishness. As another example, if the gold stocks rise quickly this week, the 16-20 index resistance signal would be the next index signal and the other index signals (a 35-39 index buy signal and/or a 92-96 index buy signal) can almost simultaneously (as is common) mark an important high. Again, the outcome should depend on the order of the index signals. I will be able to describe that in three weeks because the index signals must either occur before then or have been avoided via a continuing very bearish decline.
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.