Current USERX price = 11.02, Up 21 cents (2%) since the last report 4 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 7/01/12, described how the gold stocks had generated bullish index buy signals on 6/28/12 and that a continuing rise was predicted. The Update was basically reporting that the HUI 16-20 and 35-39 indices had generated a bullish Double Buy and that the USERX 16-20 index had also generated a buy signal on 6/28/12. The expectation for a higher low (i.e., above the May 2012) had apparently been fulfilled. My writing style reflected (upon rereading that Update after one month) some sense of arrogance that the indices had marked a meaningful low and that an impulsive rise was in process, especially if USERX continued to rise over the next 2-6 trading days. What happened?
The gold stocks then rose “perfectly” on 7/02/12 and 7/03/12 and generated the second buy index signal for USERX (the 35-39 index buy signal). Therefore, USERX joined the HUI on an historically 100% bullish Double Buy index pattern. But on 8/05/12, USERX behaved rather strangely: Gold fell .7%, and the HUI declined 1%, but USERX somehow rose 2 pennies. That formed a meaningfully bearish run pattern of 3 Down and 4 Up for USERX. That’s the same run pattern as the 6/06/12 high. Nonetheless, the index pattern predicted higher prices.
The gold stocks then declined and the USERX 35-39 index Double Buy signal actually marked a short-term high for the first time in decades. Prices declined and actually sold the USERX/HUI 35-39 indices.
The decline into 7/23/12 went down to hit/touch that very long-term supportive 884 index. That was the index that was hit/touch on the day of the October 2008 crash low. It was hit/touched on 6/28/12 as the indices also generated buy signals, so that looked like a low. But that low was surpassed on 7/23/12 as the long-term supportive 884 index was hit/touched again.
Although the gold stocks ended up declining after the bullish index pattern 4 weeks ago, Jeff did not sell because the long-term indices/cycles have been providing bullish bottoming signs that were once again hit/touched this past Monday (7/23/12).
USERX has now rebounded back up to the bottom-side of the 16-20 index resistance and it is above the index buy-in prices from that historically “perfect” Double Buy pattern that has always yielded a profit (but it’s never done it in this manner, with the gold stocks declining before rising!). The SKI long-term systems are bullish, Jeff’s bullish because that long-term 884 index support is rising. There’s lots of index resistances above the current price when/if prices rise over the next several weeks.
But the most important immediate information is likely to be provided by the USERX run pattern IF the gold stocks rise again on Monday (7/30/12). USERX fell for 2 days and it’s now risen for 4 consecutive days into this past Friday (7/27/12). A continued rise on Monday (that can even extend to 6 days up on Tuesday) will yield a very high probability run pattern of 2 Down and 5 or more strong days up. The historical importance of such runs is exemplified by the most recent 2 Down and 5 Up run pattern into 12/06/2010. That was the exact day of the 1.5 year high in USERX at 22.11. Gold was at $1405: That’s how badly the gold stocks have performed relative to bullion. Jeff remains bullish into August and a new run pattern could “confirm” the completion of the 1.5-year “correction/destruction” in the gold stocks, as well as being significant for the entire precious metals’ sector.
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.