Current USERX price = 7.55, Down 15 cents (2%) 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 7/27/14, concluded that SKI was completely inconclusive but that a significant bullish OR bearish index pattern was likely within a few days: It was possible to obtain a 92-96 index buy signal and a 221 index buy signal for a real bull market OR the avoidance of index buy signals that would maintain the bearish index pattern that was in place as that SKI Report was being written (via a 92-96 index sell signal).
Since that last 321gold SKI Report, the gold stocks rose for a day and then declined significantly for a week into 8/05/14 at USERX 7.39. That decline wasn’t sufficient to avoid generating a potentially long-term bullish 221 index buy (that had previously been avoided at the July high). The decline WAS sufficient to generate a 16-20 short-term oversold buy signal. The USERX 16-20 index buy signal executed on 8/04/14 at 7.44 (one day before that 7.39 low, but exactly on the HUI’s closing low of 234.57). Such 16-20 index buy signals “can” mark the low (and it HAS marked the low-to-date), but it followed the 7/25/14 92-96 index sell signal. Therefore, that buy signal was XXed Out (i.e., it was precarious again) and Jeff wanted to see if the 92-96 index would also generate its buy signal.
The master 92-96 index buy signal generated on the day of the USERX low-to-date, on 8/05/14. Therefore, the indices generated a 16-20 index buy signal AND a 92-96 index buy signal (while the very long-term 221 index was on a new buy signal), for a Double Buy index pattern. Jeff sent a buy Update on 8/05/14 and then went fully long.
Since that Double Buy index pattern, USERX rose for 6 consecutive days and formed a classic (i.e., historically meaningful) 2 Down and 6 Up run pattern. As USERX rose for the 5th consecutive day on 8/12/14 and then the 6th consecutive day on 8/13/14, the historical probabilities were 98% for a decline that would end the short-term run higher. The gold stocks then declined for two days into this past Friday (8/15/14), but did not come close to selling the USERX 92-96 or 221 indices.
The bullish case definitively requires/needs a rise into a USERX 16-20 index short-term sell signal. The bearish case needs a decline that avoids such a 16-20 index signal AND generates a 35-39 index sell signal. As always, you can look back 16-20 and 35-39 trading days to determine which of those index signals occurs next. USERX is, as of Friday, hitting/touching both indices. ONE OR THE OTHER INDEX SIGNAL MUST OCCUR WITHIN THE NEXT 9 TRADING DAYS (100% certainty; it’s mathematical).
Jeff is fully long from the USERX 92-96 index buy signal that generated on 8/05/14. The only thing that matters is the sell-stop (at a loss or a gain). That sell-stop is a 35-39 index sell signal that is close to occurring but has not occurred (yet?). The bullish case now needs a rise to above the USERX prices from 16-20 trading days earlier. This issue “WILL” (not “may”; it’s mathematical) resolve within the next 9 trading days. The only thing that really matters is the SKI sell-stop that is close to generating (within 2-3 trading days) via a 35-39 index sell signal, but has NOT occurred.
I can also definitively (100%) report that if the expected rise occurs over multiple months, this is not a true bull market whereby the gold stocks rise to a new higher level and remain there. SKI is not on a true bull market 92-96 index buy signal but is on a new very long-term 221 index buy signal. Therefore, the 221 index strongly suggests bullishness over multiple years, but the absence of the true bull market 92-96 index buy signal indicates that a strong, multi-month rise will be followed by a major decline back down. Remember that last sentence if the gold stocks rise over multiple months to the very long-term SKI index resistances (where Jeff will be selling). But for the even longer-term, the 221 index indicates that a decline (after months of rising prices), will yield more bullish rises.
The bullish case has not yet obtained confirmation via a rise into a USERX 16-20 index sell signal. And the bears can still “win” via a 35-39 index sell signal. Again, such confirmation, one way or the other, WILL occur during the next 9 trading days. Hence, there’s still meaningful/immediate uncertainty, but the above paragraphs are definitive and cannot (will not) be altered.
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.