Current USERX price = 7.44, Up 88 cents (13.4%) 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 7/07/13, described how the gold stocks (the HUI) had generated a new 16-20 index buy signal on 6/20/13 and how USERX had manifested a 2 days Up and 5 strong days Down run pattern that has marked the ending of several prior major bearish historical periods. The caveat, at the time of that prior Update, was that the gold stocks were still below those 6/20/13 price levels two weeks later. The 16-20 index buy signal is supposed to yield a rise into a 16-20 index sell signal (as the HUI rises over the prices from 16-20 trading days earlier) approximately 20 trading days after the buy signal.
Since that last SKI Update, the gold stocks have risen approximately 13%. Most of the gains have occurred on three nice daily rises (7/11/13, 7/16/3, and 7/22/13). Note that 7/19/13 was exactly 20 trading days from the 6/20/13 generation of the 16-20 index buy signal. The rise into 7/19/13 generated the next 16-20 index sell signal for both the HUI and USERX. Prices usually rise into the execution of the index signal and there was the strong rise on the next trading day (7/22/13). That was rather perfect.
The 16-20 index sell signal that executed on 7/22/13 is the first level of resistance and usually marks highs to within one trading day. It is the resistance that has stopped each of the five multi-week rallies during 2013. The second level of resistance is the 35-39 index. When the gold stocks continued higher on the day after the 16-20 index sell signal, the 35-39 index resistance was hit/touched on 7/23/13. The last time that the 35-39 index resistance was hit/touched was on 6/04/13, one day after the 16-20 index was hit/touched at the 6/03/13 high.
And so, the gold stocks hit SKI index resistance early last week. The question going forward is, “Will the SKI structure of index signals change from the past 2 years of bearishness into a bullish structure?”. The 2 Up and 5 Down run pattern near the June 2013 low certainly was suggestive of such a change and prices have risen.
The structural change would occur under two conditions. First, if the gold stocks could rise over the next 1-2 weeks, USERX and the HUI could go over their prices from 35-39 trading days earlier and generate the first 35-39 index intermediate-term buy signal since the summer of 2012.
The second alternative structural change would be more clearly historically bullish: A decline from the current index resistance that carries back below the prices from 16-20 trading days earlier (to generate another 16-20 index buy signal) while also staying above the prices from 35-39 trading days earlier. That becomes mathematically possible when the gold stocks decline, but fail to decline enough to stay below the declining prices from 35-39 trading days earlier. THAT WOULD GENERATE A BULLISH STRUCTURAL CHANGE by generating a 16-20 index buy signal AND a 35-39 index buy signal. The two index signals should occur almost simultaneously to mark an August low to within one trading day. Jeff refers to such index patterns as “Double Buys”.
The gold stocks and gold have risen from the index buy signal and the run pattern described in the prior SKI Update, but Jeff is waiting for a “structural change” in the SKI indices before stating that THE major low occurred in late June. Index resistance occurred last week, exactly 20 trading days from the prior 16-20 index buy signal. The “structural change” would be most evident if the gold stocks declined into two simultaneous index buy signals (a short-term AND an intermediate-term Double Buy index pattern) during August. The market is set up, via the indices, for that bullish possibility. If that occurs, Jeff will not only recommend buying, but will also initiate the first leveraged buy (via SKI Gold Futures) in approximately 2.5 years. The next 321gold Update may be delayed by one week.
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.