Current USERX price = 6.81, Down 74 cents (11%) 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 8/17/14, did not contain any clear predictions for the gold stocks and gold, but did contain multiple DEFINITIVE statements that “could not be altered”. Jeff does not report any definitive statements unless they are 100% mathematically certain based upon the SKI indices. Those definitive statements were: (1) This was NOT a bull market in the gold stocks, (2) The bullish case REQUIRED a USERX [gold stock mutual fund] rise to over the prices from 16-20 trading days earlier whereas the bear case REQUIRED a decline to below the prices from 35-39 trading days earlier, and (3) The situation WOULD resolve within 9 trading days of 8/17/14. Jeff was back to being fully long from 8/06/14 at USERX 7.51, but the only thing that mattered was whether the sell-stop (at a loss or a gain) was going to be hit, possibly within 2-3 trading days. The sell-stop would be hit if USERX fell below its prices from 35-39 trading days earlier to generate a 35-39 index sell signal.
Note: Lots of people subscribed to SKI as the gold stocks were rising in early July 2014, but almost no one subscribed when I could make definitive statements and had a clear sell-stop. That’s human nature, but that is not what you are supposed to do as an investor/trader.
Since that last 321gold SKI Report, the gold stocks declined for 4 consecutive days. And as USERX fell below the SKI buy-in price of USERX 7.51 on 8/21/14, the 35-39 index generated its sell signal to be executed at the close of the following trading day. Therefore, THE BEARS WON and Jeff sold for a 1.8% loss at USERX 7.38 on 8/22/14.
The gold stocks then dropped for one day and then rose for 4 consecutive days into the 8/29/14 3-day holiday weekend (that is often a critical technical point in the gold market). [And remember, I’ve warned you to be wary of buying because of a “Seasonal pattern of rising during September” or “A rise over the 200-day moving average”]. The SKI indices for the HUI executed two index signals on 8/29/14: A 16-20 index sell signal and a 35-39 index buy signal. Such tied signals were NOT definitive. Such index signals either mark an exact high or an intermediate-term bullish breakout. And USERX generated a new 16-20 index sell signal on that day for execution on the day after the 3-day weekend. Again, such an index signal is not definitive because USERX could then either rise to its 35-39 index buy signal or plunge into a 16-20 index buy signal. Note that the 16-20 index sell signal was going to execute EXACTLY 20 trading days from its 8/04/14 buy signal. The prior SKI Report had definitively stated that the bullish case required a rise into a 16-20 index sell signal and now it WAS occurring, but would the index sell at a profit, as is REQUIRED for the bullish case?
Of-course the gold stocks then declined strongly on 9/05/14. The USERX 16-20 index therefore sold at 7.31, at a loss from the 7.44 buy-in price, AND THE BEARISH CASE “WON” again. Jeff sold his youngest son’s small remaining USERX position that he had stopped me from selling at 7.38 (when the stop-loss was executed).
The interesting thing is that a rise after that 3-day holiday weekend would have generated a Mechanical SKI 35-39 index buy signal OR a decline would have generated a Mechanical SKI 16-20 index buy signal. You can listen to Jeff’s holiday interview here, where I repeatedly stated that: (1) It isn’t a bull market, and (2) A rise or a decline after the holiday weekend would generate a Mechanical SKI buy signal. But no one really seemed to care….
The strong decline after the holiday weekend therefore generated a short-term 16-20 index buy signal. However, Jeff refrained from buying that short-term buy signal for a number of reasons that I won’t spend the time to detail here. THE MAIN POINT IS THAT THE LONG-TERM SKI INDICES AND THE LONG-TERM CYCLES ARE IN CONTROL HERE.
The long-term SKI indices are the 92-96 index (which is the master index for the regular SKI indices including the 16-20, 35-39, and 92-96 indices) and the 218-222 index (which is the master index for the very long-term SKI indices including the 221 index, the 442 index, and the 663 index).
In retrospect, it’s easy to see that the USERX 92-96 index signal marked a significant high on 7/10/14. The 221 index just missed giving its index signal at that same time, but did generate its signal on 7/28/14. NOW THE 221 INDEX HAS SOLD AND MARKED 9/11/14 AS A TECHNICAL POINT AND THE 92-96 INDEX IS WITHIN TWO TRADING DAYS OF GENERATING ITS NEXT SIGNAL. The 92-96 index signal will generate in 2 trading days if USERX declines about 1%.
If/When the 92-96 index signal generates into the 9/17/14 U.S. Federal Reserve announcement, the precious metals’ sector will be at the next major long-term SKI technical point based upon the long-term indices (cycles). I cannot say to buy into such a decline, but if there is a brief subsequent rise, both master long-term indices will generate buy signals because the indices’ back prices are both DECLINING. LOOK BACK 92-96 AND 218-222 TRADING DAYS (for USERX) AND YOU’LL SEE WHAT I AM WRITING ABOUT. The 92-96 index’s back prices are declining towards their late May 2014 lows and the 221 index’s back prices are declining towards the late December 2013 low. The gold stocks (USERX) need to get back above both of those indices’ back prices to turn bullish and provide the likelihood that a long-term cycle/index low has completed. I’ve never seen such an index buy pattern since 1974 (whereby both long-term indices buy almost simultaneously), but I’m expecting to buy such an index pattern (IF it occurs) because it could be highly bullish and act like a bull market (after I “told you” that it still was not a bull market this summer). Again, SKI either obtains those buy signals OR the gold stocks decline to new multi-year lows. I cannot hedge that conclusion because that’s the mathematical state of the indices’ back prices. Gold looks terrible on the charts and I won’t detail it here, but let’s see if USERX generates the two simultaneous long-term index buy signals. Otherwise, it’s down to new multi-year lows.
Best Wishes, Jeff
P.S. I apologize for being a week late (again) with this 321gold SKI Report. Lisa and I were once again traveling to see our new grandson and this time, we were babysitting for a week and obtaining little sleep (my smile). We got to see his first full smile and first laugh at 7 weeks of age.
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.