Current USERX price = 12.74, Down 1% 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.
In the last gold stock SKI Report written on Sunday 7/26/09, simply titled “Gold Stock Update” (unlike my usual attempts to catch your eye via some compelling title; smile; I concluded with the sentences “If prices do not begin a major decline this coming week (and I do not expect such a major decline), the 881-885 index’s back prices will rise for a week, then decline for about two weeks, and then begin the 2006 bull market rise to the USERX high of 17.96 in May 2006. A brief decline early in this coming week followed by a rise into the following week, and then a decline for about 2 weeks would keep the bullish case alive and set up an extremely bullish pattern of either three or four simultaneous SKI index buy signals of short-term and long-term duration (a 16-20 index buy, a 35-39 index buy, a 218-222 index buy, and perhaps a new 881-885 index buy signal) in August”. I had bought the low on 7/13/09 and sold some on 7/23/09, but the prediction was a brief decline after 7/26/09, a rise for a week, and then a 2-week decline to set up “real” bullishness.
Prices then declined over the following 3 days into 7/29/09 and then rebounded to a slightly higher high a week later. The last SKI Report highlighted the 884 index (which compares the current price to prices from 881, 882, 883, 884, and 885 trading days earlier). Crazy, voodoo SKI was accurate again. Who looks back 4 years to predict weekly gold stock and precious metals’ trends? That’s “voodoo”. It’s also “cycles”.
You may have listened to or can now listen to an interview that was conducted on 8/02/09 (http://www.thefinancialtube.com/video/5072/080109-Dr-Jeffrey-Kern-on-the-Gold-Stocks). The prediction in that interview was solely based upon the 884 index, and despite the interviewer’s repeated queries regarding what I would make of a continuing rise, the specific prediction was that “If USERX failed to rise over 13.05 on 8/03/09 and then over 13.33 on 8/04/09, another top was in”. The gold stocks, ala USERX, rose to 13.19 on 8/03/09, but then failed on 8/04/09 as USERX closed at 13.22 (BELOW 13.33). Hence, the sell alert was sent and traders were “allowed to” initiate short positions.
That brings us to last week, when prices completed a decline of 5 consecutive days from the generation of the 884 sell signal, rose for 2 days and then fell on Friday (8/14/09). The prediction from the last Special Report therefore has this coming week remaining, with the forecast of a continuing decline into a final low.
I would add that the SKI indices’ very long-term system will generate a true buy signal on Tuesday (8/18/09). That will be the first true one since the last long-term sell signal on 7/28/2008 (look at a chart to see what happened then!). The 884 index and the important 218-222 index (comparing prices from 218, 219, 220, 221, and 222 trading days earlier) are extremely likely to buy soon and will portend a multi-year up-trend. Personally, I cannot “stomach” sitting through declines while waiting for multi-year rises, so I don’t invest all of my money on such very long-term index buy signals, but the SKI indices have aligned in a bullish manner, as expected.
SKI was bearish the gold/silver stocks for several years since May 2006, but turned long-term bullish in the Fall of 2008 via the rare “life run low” pattern. Since then, the indices have kept marking highs, including the 2/23/09 top, a 3/23/09 top, the clear sell on 6/04/09, and the recent tops on 7/23/09 and 8/04-8/05/09. SKI calls tops during corrective and bearish periods, but marks lows during truly bullish periods. I’ve only bought on 7/13/09 and then sold again (after all, the gold high for the year was marked on 2/23/09, particularly for non-U.S. investors). That 2008 life run low portended years of rising prices and typically a 1000% rise over multiple years. That prediction was based upon a rare run pattern and did not include bullish SKI indices (the run patterns and the indices are separate).
The pattern of the indices marking highs is starting to change into the calling of lows. SKI’s calling of lows is a distinct feature of bull markets. A decline this coming week, if it occurs, provides the opportunity for another call for a low. The very long-term indices are ready to generate buy signals. The regular 16-20, 35-39, and 92-96 indices are also setting up for bullishness.
I won’t make a new prediction until the pattern completes, but a decline this coming week that falls below the USERX prices from 35-39 trading days earlier, followed by a few days of rising prices, will once again turn SKI and Jeff into purchasers of gold stocks and precious metals. I cannot state the specific prices needed because that changes from day-to-day based upon the indices’ back prices, but we have the set-up approaching for the meaningful 2009 buy signal. I cannot write that the bullish index signals have occurred until they actually generate, but this is the first time since 2/23/09 that I can be talking about the possibility of “true SKI buy signals” and the potential for an “impulsive wave” higher.
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.