Current USERX price = 6.55, Down 89 cents (11.9%) 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 6/16/13 (http://www.321gold.com/editorials/kern/current.html), described how the gold stocks (USERX and HUI) had failed once again on 6/14/13 because it had been exactly 20 trading days since the prior 16-20 index buy signal and USERX was slightly below that index's buy-in price. That Report also warned that a decline to new 2013 lows in USERX should be a sign of another leg down in the gold stocks.
That failure of the index buy signal was immediately followed by a strong decline of 10+% and a $100+ plunge in gold bullion. Therefore, the index's time period marked the exact time of the failure. Furthermore, when USERX declined to a new 21013 low (by 2 cents) on 6/18/13, the decline turned into the expected immediate plunge.
That plunge during the week of 6/17/13 had two important features. The first feature was the USERX run pattern of 2 Up and 5 Down. Such run patterns are of particular importance when they are "strong". "Strong" is defined as an average daily decline of 2+%. When such run patterns occur at multi-year highs, they are marking major highs. You may recall, for example, that silver had such a run pattern off of the exact $50 top on 4/28/2011, potentially projecting a long-term decline to $20 (which has recently been met and slightly exceeded). When such run patterns occur at multi-year lows, they often mark major lows. However, the USERX run pattern that marks multi-year lows usually is extremely strong and/or extremely long. The 2 Up and 5 Down run pattern into 6/20/13 averaged 2.25% and "only" declined for the minimum of 5 trading days. Jeff had hoped that the run down would have continued because that would have provided for a more historically definitive major low. The fact that USERX is currently still slightly below the bottom of that run pattern (that ended at USERX 6.64) is not encouraging for an immediate bullish case.
The second feature of the decline during the week of 6/17/13 was the generation of a new HUI 16-20 index buy signal on 6/20/13. The last SKI Report (on 6/16/13) stated that a strong immediate decline would generate such a HUI index buy signal (but not for USERX). It has now been 9 trading days since that buy signal and the HUI is below the index's buy-in price. If such buy signals are going to yield a solid rise into a 16-20 index sell signal, the gold stocks are supposed to be higher than the index's buy-in price after 9-10 trading days. That is referred to as "Half-Cycle" (i.e., half of the 16-20 trading day period). The fact that the HUI is sitting below the index's buy-in at Half-Cycle has increased the likelihood of a further decline.
In summary, when dealing with market probabilities, the outcome is never certain. The current probabilities would allow for some additional sideways to higher movement over the next 6-10 trading days. Such behavior would replicate the market's pattern since the September 2012 high by rebounding into 16-20 index resistance (hitting/touching the prices from 16-20 trading days earlier) before beginning another leg down. However, the current failure of the 2 Up and 5 Down run pattern to mark an exact low and the HUI's inability to surge above the 16-20 index's buy-in price both reflect potential immediate bearishness.
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.