Current USERX price = 14.35 Up 12.6% since the last report 3 weeks ago. [corrected]
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 8/16/09, titled “Increasing Bullish Probabilities!”, I described an increasingly bullish set-up for the gold stocks and the precious metals that needed one more decline the following week. SKI had basically been calling highs in the sector, generating sell signals on 2/23/09, 3/23/09, the clear sell on 6/04/09, and the recent tops on 7/23/09 and 8/04-8/05/09, but was setting up to start marking lows for an impulsive wave higher. Moreover, although SKI gave the long-term bullish life run pattern low at $740 in the Fall of 2008, the SKI indices had not yet turned bullish, but the long-term 218-222 index was about to generate its multi-year bullish buy signal.
The day after that report was written, the gold stocks declined about 5% and gold fell $13. That day’s decline generated the multi-year bullish 218-222 index buy signal and a simultaneous short-term index (16-20 index) buy signal. It is common for long-term and short-term indices to generate index signals within a day of each other despite their very disparate cycles and such phenomena continue to validate this 25-year old system (sorry, but I still always find it to be rather incredible). Another SKI statement that I repeatedly make, is “that the indices mark the highs and lows to within one day”. The indices generate on one day and then execute at the close of the following day (developed that way so as to allow me to work a job and have one day’s “notice” of buying/selling). Therefore, the indices generated on THE day of the low and executed the next day, 8/18/09, one day after the low. THE LONG-TERM SKI SYSTEM (the 218-222 index, the 439-443, and the 660-664 index) WENT TO A BULL MARKET ON 8/18/09 after having sold on 7/29/2008 (look at a chart at what happened after that sell).
There is one more bullish set-up that is required for the all-clear bull market. That involves the regular SKI indices (the 16-20, 35-39, and 92-96 indices). Sure, the 16-20 short-term index bought along with the 221 index on 8/18/09, but a true bull market REQUIRES a 92-96 index buy signal that is On the Path of trades/indices. That index marked the high to within a day on 2/23/09 at gold $1002 and has not, as yet, generated the true bull market signal. It will also require a price decline to turn bullish, but that decline can come from a higher level.
At the 8/17/09 low, the regular SKI indices were on a 35-39 index buy signal. In order for the regular system to turn bullish, prices needed to either rise slowly or decline to sell that 35-39 index and then re-buy it. That’s what happened: As prices rose slightly for several days, a 35-39 index sell signal was generated and then that index re-bought for a true SKI buy on 8/26/09 as the short-term 16-20 index sold (again, simultaneous signals). That was bullish, but a strange thing happened: The day after the short-term index gave its sell signal, it re-bought. THAT MEANT THAT WHEN PRICES ROSE AGAIN, THIS SHORT-TERM CONTRARIAN INDEX (that buys on declines and sells on rises) WOULD HAVE TO GENERATE ANOTHER SELL SIGNAL. That short-term index sell signal executed on Friday, 9/04/09. The gold stocks have again hit resistance.
I decided to include the “stupidness” term to catch your eye and to include “truth in advertising”. I have this rather amazing mechanical system of indices but it takes a human to execute them. I always had “difficulties” when I was a reader of financial newsletters in the 1980s and my number one priority is honesty.
My weekly Updates and almost daily messages contain the mechanical SKI signals (that you can easily calculate yourself) and my own (Jeff’s) actions. I sometimes avoid the mechanical signals because they are not perfect. The recent buy signals were not supposed to be avoided, so Jeff bought. And I buy with 100% of my non-retirement monies (the retirement monies are restricted) and that is more than 50% of my net worth. So I certainly “put my money where my SKI-mouth is”. But this time, I “blew it” out of emotional fear. When the gold stocks and the general stock market declined last Tuesday (9/01/09), mechanical SKI was within a day of being stopped out and the general stock market looked bearish (and actually still does). I wasn’t supposed to sell until mechanical SKI sold and that was not supposed to occur. But I sold out of fear. I’ve made such emotional mistakes before and will do so again, typically every few years. The last time I did that was in August 2005 when SKI executed its last true bull market 92-96 index buy signal on 8/09/05 and I sold a week later at an exact low when prices fell to below my buy-in price for one day. I then re-bought a week later at a 2% higher price and rode the bull. This time I may re-buy on a decline next week or wait until the next buy signal because the regular SKI indices are not yet on the true 92-96 index bull market.
My 1985 research yielded three prediction “systems” that vary in their time frames: Run patterns, the long-term set of 3 indices, and the regular set of 3 indices. The run pattern is a very long-term and simple system that generated a buy at the low in August 1998 and sold 5 days after the high in May 2006. It turned bullish during the expected crash in the Fall of 2008 and portends many years of rising prices. The long-term set of indices turned bullish again on 8/18/09 and portends several years of rising prices! The regular indices (that I and most folks use because we don’t buy-and-hold for many years at a time) have now turned bullish via a 35-39 index buy signal on 8/26/09.
35-39 index buy signals represent the transition from bearish or corrective periods to bull market 92-96 index signals. Therefore, if you have missed this rise, you have not “missed the train” because SKI is not, as yet, on a regular system bull market 92-96 index buy signal. If this is going to transition into a true 92-96 index bull market in the next couple of months, price must decline to below the current level one more time (after a continuing rise above the current price level).
35-39 index buy signals have an historically clear and high probability pattern of rising a specific number of trading days and a specific percentage until the gold stocks reach an intermediate-term high. Sorry, but I am not going to state those figures here as I reserve them for skiers. Suffice it to say that the 35-39 index bullish period will end before the end of this month as the rise hits the long-term indices (as happened on 6/02/09) and a 10-15% decline should follow. I expect SKI to call that high to “within a day”, as usual, but I won’t state that with any “guarantee”. SKI requires such a decline to set up the true bull 92-96 index buy signal. Such a buy signal will turn everything bullish, if it occurs as expected in less than 2 months.
And most interestingly, the SKI short-term indices executed sell signals this past Friday (9/04/09). The goldies are at resistance! But you probably thought that anyway as gold approaches the $1000 barrier once again. Although the run patterns and long-term indices are all bullish, SKI is set up to turn very bearish IF prices completely retrace last week’s rise within the next 2 weeks. That would stop SKI out at a small profit and turn the regular SKI system back to bearishness. I do not expect such a decline, but the short-term index sell signal does predict a decline early this coming week.
Therefore, SKI predicts an immediate short-term decline, followed by a rise into an intermediate-term high, and then a decline that may/should generate the needed 92-96 index true bull market buy signal within a couple of months.
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.