Current USERX price = 7.29, Up 22 cents (3%) 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 SKI Report, written on Sunday 7/16/17, described how the special 2 Up and 6 Down USERX run pattern had held as a low on 7/07/17 and how SKI’s 35-39 index was likely to generate a new buy signal within the next 7-8 trading days after SKI had experienced two consecutive small whipsaw losses during the past month.
After that Report, the gold stocks continued to edge higher and the 35-39 index bought quickly on 7/19/17. The index’s buy signal portended a continuing rise to a 16-20 index sell signal (when the gold stocks rise over the prices from 16-20 trading days earlier) AND, a potential bullish “break-out if they could rise through that first resistance 16-20 index sell signal. Since the gold stocks were still behaving in a mediocre manner, conservative Jeff only bought a 25% long position.
After that 7/19/17 buy signal, the gold stocks meandered a little higher and lower, but did eventually rise into the expected 16-20 index’s resistance sell signal that executed on 8/01/17. USERX actually topped 2 trading days earlier (on 7/28/17), but gold made a new closing high and GDX made a new intra-high exactly on that exact 8/01/17 index resistance signal. Prudent Jeff sold about 50% of the prior purchase at a small profit.
When gold declined from that 8/01/17 resistance signal, and when USERX experienced a harsh 3% decline on 8/04/17, the SKI 35-39 index generated a sell signal. The 35-39 index had been whipsawed into another small loss. The indices had therefore formed a classic Double Sell pattern (a 16-20 index sell signal followed by a 35-39 index sell signal). That pattern has a very high historical probability of being bearish so Jeff reversed to a 50% short position. The gold stocks were supposed to decline into a new 16-20 index buy signal.
They did decline into the 16-20 index’s buy signal that generated last Tuesday (7/08/17). The bearish Double Sell provided an almost 90% probability that the new 16-20 index buy signal would NOT mark a low. In SKI terminology, the buy signal was “XXed Out”. And yet, gold was due for at least some rise after declining for a run of 5 consecutive days.
From the 16-20 index’s buy signal, to the end of last week, the gold sector moved solidly higher. Therefore, the 16-20 index buy signal DID mark a low. And yes, Jeff was whipsawed again as I went back to cash last Thursday when USERX was at 7.11. I never use news events, such as North Korea tensions as the “reason” that the high-probability index pattern yielded the low-probability result.
SKI has now been whipsawed 4-5 times. That “reversion to the mean” occurs after an extended excellent period. In the summer of 2016, I wrote that SKI was due to for errors because the indices had yielded such exact buy signals at each low in the bull market. But the precise marking of lows and highs persisted and I noted again earlier this year, that it was due to stop. It finally stopped after the excellent 92-96 index buy signal one day after the 5/04/17 low. Now, it’s almost time for me to write that this SKI-whipsaw period has extended long enough that it should end soon (smile).
If you read “About SKI” (https://ssl.skigoldstocks.com/about.php), the only boldfaced sentence states, “Another way of viewing these indices is that they are certainly marking critical points”. That continues to be the case and I rarely use the word “certainly”. Critical points can be lows, highs, and/or “break-out” points (e.g., the index signals marking an intermediate-term break-out but a short-term, several-week top) in time plus price.
Gold appears to have bullishly broken above and then held a back-test of its chart downtrend line from the 2011 top during the past 3 weeks. It appears that many analysts are expecting a bullish “break-out” in the gold stocks. SKI/Jeff conclude: The rise from last week’s XXed Out 16-20 index buy signal should/will generate a 16-20 index sell signal to mark some resistance. And the rise is also likely to generate another 35-39 index buy signal. The two index signals, coming together (as often occurs) should mark the next critical point, usually to within a day. We know that those index signals aren’t marking a low. They should mark resistance (with some subsequent decline or at least sideways movement) and we should soon see if they will also occur on a “break-out”.
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 daily messages/alerts at a slightly higher price along with access to our informative Forum.