Current USERX price = 7.70, Up 22 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 6/22/14, concluded that Jeff and SKI were long the gold stocks, but were antsy, expecting a sell, and would sell via a master long-term 92-96 index sell signal and/or a longer-term master 221 index sell signal. At that time, USERX was at 7.48. The usual 3-week SKI Report was then delayed as Lisa and I flew out without notice for the early birth of our first grandchild (Scott Kern!). And so, after a very healthy birth for which we arrived 4 minutes ahead of time, the almost simultaneous tragic death of my son’s friend’s infant, multiple travel hassles, multiple sleepless nights, the crash of several computers, and a return to a 100 degree home with broken air conditioning, etc., life has almost returned to normal and it’s time for the next SKI Report. And thanks for those well-wishes that I could not respond to…
Since that last 321gold SKI Report, the gold stocks kept rising but could not rise enough to stay ahead of the indices’ rising back prices from 92-96 and 218-221 trading days earlier. YOU COULD TRACK THAT YOURSELF: IT’S OBJECTIVE/mathematical. Therefore, the very long-term (multi-year) master 221 index sold on 7/03/14 at USERX 7.73 and the master long-term (1+ year) 92-96 index sold on 7/08/14 at USERX 7.70. It was quite unusual (historically) for those indices to sell on a rise (i.e., they usually sell on a decline AFTER a top).
And then, prices rose for a day and the 92-96 index quickly re-bought for a potential bull market on 7/10/14, but the 221 index failed to generate its re-buy. In fact, the closing high to-date was on 7/11/14 at USERX 7.94. That was 220 trading days from the September 26th 2013 HIGH of USERX 8.21 and was the EXACT high for the 221 index’s back prices (that had its 5 highest back prices of 7.87, 8.10, 8.21, 7.98, and 7.86). Therefore, the 221 index was hit/touched but did not generate its new buy signal. Since 92-96 index bull market buy signals are almost always followed by at least short-term ABC declines before “taking off”, and since the 221 index was strongly suggesting a top, Jeff could not recommend buying and I did not re-buy. But frankly, I did recommend that folks with zero exposure to the gold stocks should initiate a small buy to prevent them from “chasing the market higher” and that such long positions needed to use another 92-96 index sell signal as a sell-stop. If such 92-96 index potential bull market buy signals are going to sell out, they usually do so in 1-2 weeks at a small loss. Of-course, using hindsight, that 92-96 index buy signal and the 221 index’s failure to generate a buy signal marked the exact intra-day and closing highs, respectively, and without surprise (the index signals usually mark “the technical spot”).
The gold stocks immediately fell for 2 days into 7/15/14 at USERX 7.54, rose back up, and then fell again into last Thursday (7/24/14) at USERX 7.54 again. The decline into last Thursday had all the characteristics of the expected ABC decline to hit/touch the supportive 16-20 index and launch a true SKI bull market. However, surprisingly, Thursday’s decline also was just enough to generate a new 92-96 index sell signal. If USERX had closed above 7.57 that day, the 92-96 index would not have generated a sell signal, but it closed at 7.54 and generated the sell signal that always executes the next day. And USERX had continued (each day) to just barely avoid the new and needed (for the bullish case) 221 index buy signal. Therefore, the potential bull market 92-96 index buy signal was stopped out at this past Friday’s close for a 1.5% loss (that is perfectly historically “normal” in terms of price and time) and SKI + Jeff await imminent new index signals.
So now we sit on an exact SKI technical cusp with SKI and Jeff in trading cash (I do have a highly long-term “core” position). The 92-96 index has just sold to open the SKI Path of Trades to the next index buy signal that may or may not occur. Multiple SKI indices are literally within 1-2 trading days of generating buy signals. Since the 221 index’s back prices are plunging (look back 218-221 trading days), and the 92-96 index’s back prices are peaking exactly at the March 2014 high (look back 92-96 trading days), and the 16-20 index is within 2 trading days of generating a buy signal, SKI cannot be more perfectly/exactly INDETERMINATE but ready. A harsh decline early this week can still generate 221 and 16-20 index buy signals that execute directly before or on Wednesday’s U.S. Federal Reserve announcement to mark a low. Such a decline needs to involve specific USERX closing prices that are reserved for subscribers. And then such buy signals need to be confirmed by some rise into a 92-96 index buy signal (as that index’s back prices begin to plunge in 2 [yes, two] trading days). That would NOT be a SKI bull market, but can certainly target a 40-50% rise over months and a long-term trend change to bullishness.
And a rise during the next 2-3 trading days can yield simultaneous (normal) 92-96 index AND 221 index buy signals. Such buy signals will be historically likely to mark another short-term high BUT THIS TIME, THOSE INDICES’ BACK PRICES WILL BE PLUNGING AND UNLIKELY TO SELL for a long, long time. Hence, despite another historically likely short-term decline, a SKI long-term bull market should commence if that index pattern occurs.
Bears need an immediate decline to either avoid the 221 index buy signal (again, prices are mathematically specific and reserved) OR a 221 index buy signal that yields only a brief bottom, a rise that avoids a 92-96 index buy signal, and a quick subsequent 221 index sell signal that maintains potential “Armageddon” to new multi-year lows.
Again, I know that few folks are interested in reading about uncertainty, but this spot into 7/28/14 – 7/30/14 is perfectly set-up for either long-term bullishness OR continuing long-term bearishness. The SKI indices are on the brink for either eventuality. The possible scenarios are 2 out of 3 bullish (i.e., a solid SKI-exact decline early this coming week can initiate multi-month bullishness, or a specific rise should yield long-term bullishness). But a large decline that avoids the 221 and 92-96 index buy signals should maintain long-term bearishness. How’s that for an “extreme conclusion” that Jeff will be adamant about, but cannot specify at this index-marked technical point? And yes, this is probably much more complicated than almost anything else that you read, but it’s also usually precise to within +/- one trading day. The next few days are likely to be important for the long-term trend.
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.