Current USERX price = 8.52, Down 59 (6.5%) 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.
My heartfelt condolences to Bob Moriarty and family on the passing of Barb Moriarty. I never had the pleasure of meeting her in person, but she’d call me to converse every year or two for the past almost two decades. Her calls were rarely about the 321 website or the market. They focused primarily on personal life. Her last call was in October 2017, when she was thoughtful enough to inquire about my well-being after a mass shooting in Las Vegas. I will miss her, but that’s meaningless compared to the loss for Bob and her family. I wish them comfort during this time of loss and going forward.
Back to the gold stocks, I apologize to readers for having simply forgotten that last weekend was when I was supposed to write another SKI Report for 321gold (3 weeks after the prior one).
The last two SKI Reports maintained the SKI bull market that began in mid-June. That bull market was not simply a function of rising prices. Rather it requires a specific sequence of index signals that is led by a master 92-96 index buy signal. The index’s buy signal generated exactly on the day (6/20/19) when gold “broke out” above the major $1350-1370 resistance level. And then, within a few days, the even longer-term 221 index generated its buy signal.
Those two Reports were almost reprints of each other because the focus was on the inevitable corrective decline in the gold stocks and gold (Ski Report). The issue was “when”, not “if” the first corrective decline would occur, as well as describing the SKI index signals that occur during corrections inside of bull markets. Simply, a correction has occurred when the gold stocks decline to at least generate a 16-20 index buy signal. That involves a decline to below the prices from 16 through 20 trading days earlier. The index is “contrarian” because it buys on declines. And more severe corrections also involve declines to a 35-39 index signal (the prices from 35 through 39 trading days earlier).
Of-course, it’s recommended that SKIers buy on the 92-96 index’s bull market buy signal. But for folks who come “late to the party” or who did not buy “enough”, it’s recommended that they try to avoid chasing the market higher (unless they are short-term traders) and wait for the corrective decline that has always occurred.
After that last Report on 8/18/19, USERX declined almost 3% the very next day, down to 8.88. That decline caused the 16-20 index to be within 1 trading day of generating its supportive 16-20 index buy signal. Therefore, we were preparing to buy more. But the index’s buy signal was immediately avoided via an even stronger rise the next day (8/20/19). THEREFORE, that did NOT meet the definition of a “correction” and the ensuing strong rise was NOT the start of a new bull market impulsive rise: The normal correction that (historically) has always occurred was going to take longer to develop.
The harsh decline that’s occurred over the past 7 trading days has now met the definition of a “corrective decline”(so it actually worked out well that I forgot to write this Report last weekend; smile). The 16-20 index executed its buy signal on 9/10/19 at USERX 8.76. And the 35-39 index was being hit/touched, moving towards its signal. The rise on 9/11/19 and then the strong rise in the morning of 9/12/19 threatened to avoid the 35-39 index’s signal. And the HUI needed at least a small decline on 9/12/19 to generate its 35-39 index signal. The gold stocks then reversed to the downside on 9/12/19 in an ugly bearish manner. But that was what was needed to generate the USERX (and HUI, and GDX, and GDXJ, and XAU) 35-39 index signals. Therefore, the 35-39 index has marked this past Friday (9/13/19) as the next Price X Time technical point at USERX 8.52 for a potential “typical” bull market corrective low.
The brevity of the 7-day corrective decline causes concern. It’s also concerning that Cash Gold began its strong decline after closing/settling at the rather exact long-term horizontal resistance of $1550.30 on 9/04/19 (the repeated lows from 2012-2013). Yes, the gold stocks “can” still go lower without destroying the SKI bull market. That did happen during the 1979 and 1982 bull markets. Empirically, there is a significant positive correlation between the size of the corrective decline and the duration + size of a bull market:The bigger the corrective declines, the bigger the ongoing bull market. Therefore, buying on Friday was “disciplined”, buying at prices below Friday’s close would be “disciplined”, and the last resort buying point (with less risk but at a higher price) will now occur if/when the gold stocks rise back over the 35-39 index for what has historically-yielded the next intermediate-term impulsive rise.
The true SKI sell-stop for long positions will occur when the master 92-96 index sells. That index is down at (exactly) the early May 2019 low of USERX 6.46. So it’s not “ready” to sell. That possibility will become more feasible in 2 months when the index’s back prices rise to the 8.00+ level. And the 35-39 index has up to 35-39 trading days from 9/13/19 to re-buy. Note how those two time periods now coincide. If the 35-39 index does not buy back by that time, a failed bull market will become a real possibility (but that is NOT expected).
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 $30 (for a one month subscription) or more ($240 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.