Current USERX price = 13.93, Down 3% 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.
I apologize for being a week late with this Update, but last weekend turned out to be busy with family and holidays. In the last gold stock SKI Report written on Sunday 9/06/09, titled “SKI Bullishness/Jeff Stupidness”, I described how the very long-term SKI index system (the 218-222 index) had turned generated its multi-year buy signal on 8/17/09 (after having been bearish since 7/29/2008), joining the even longer-term life run low bullish pattern from the Fall of 2008. Moreover, the regular SKI system (that most folks use because the longer-term ones are “too” long-term) had bought on 8/26/09 via an intermediate-term 35-39 index buy signal.
That 35-39 index buy signal predicted a rise to a rather specific Price target AND a rather specific Time target. It also portended that if you were “stupid” like Jeff was in that 9/06/09 Report and had not bought, that you had not missed “missed the train” because regular SKI was “only” on a 35-39 index buy signal, not the true SKI bull market 92-96 index buy signal.
That 35-39 index buy signal on 8/26/09 had a history of portending a gold stock rise of 17-21% over 17-21 trading days (about 1% per day). When I wrote that last Report, the gold stocks (USERX) had already risen 14%, from 12.61 to 14.35.
The rise continued and hit the price projection on 9/16/09 and actually exceeded that 21% projection by 2%. That turned out to the intermediate-term high. However, it occurred unusually early, just 14 trading days from the buy signal. The time projection of 21 trading days ran out on 9/25/09 as the gold stocks were already declining.
As I described last time, 35-39 index buy signals represent the transition from bearish or corrective periods to bull market 92-96 index signals. After prices decline from a 35-39 index rise, the market has the opportunity to generate the needed 92-96 index true bull market buy signal within a couple of months. THAT DECLINE IS OCCURRING AND WE NOW HAVE THE RARE OPPORTUNITY FOR A TRUE SKI BULL OVER A 1-2 YEAR PERIOD.
Note that I wrote that we have the rare “opportunity” for the true SKI bull. I am not “hedging”. It has not happened yet but this is the first real opportunity since the last true SKI bull in 2005-2006. (I know that prices went higher in 2008, but SKI had all of that as corrective activity such that a decline to below the 2006 and 2007 lows was supposed to occur). The current opportunity will last for a little less than the next month.
To obtain the 92-96 index bull market, prices need to decline below the prices from 92-96 trading days earlier AND then go back above such prices in short order (i.e., before the 35-39 index sells). USERX is currently at 13.93 and the 92-96 index back prices for USERX (the gold mutual fund) this coming week are (drum roll, please; smile):
After next Friday (10/09/09), the 92-96 index back prices rise a little further and then begin the decline from the June 2009 top! Therefore, if the gold stocks can stay down here or decline a few more percent, the 92-96 index will sell and then, if prices stop falling, the 92-96 index will re-buy for a bull market buy signal.
Meanwhile, the 35-39 index back prices are lower than the 92-96 index back prices. Therefore, it is possible for the gold stocks to fall below the 92-96 index WITHOUT falling below the 35-39 index. That’s the rare true bull market opportunity. The 35-39 index back prices for next week are:
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 NOW HAVE THE OPPORTUNITY TO ALSO TURN BULLISH OVER THE NEXT SEVERAL WEEKS via a 92-96 index buy signal.
If prices can remain at present levels or lower over the next 1-2 weeks and then hold or rise for a week or so, all SKI systems will be on major buy signals that portend a rise of 100-500% in stodgy USERX (a gold mutual fund) over the next 1+ years.
There is no guarantee that we’ll get that bullish signal, but everything else that I have is portending a bull market, so I am expecting that it will occur. Do NOT invest on such “expectations”. Wait for the actual signal. The bearish alternative is that prices do decline to sell the 92-96 index, but also decline enough to sell the 35-39 index for a bearish Double Sell index pattern. Therefore, the safe-SKI thing to do is to wait for the new 92-96 index buy signal as opposed to buying the low that will likely be marked to within a day by a 92-96 index sell signal. A rise at this point is not particularly bullish, because SKI would still only be on the current intermediate-term 35-39 index buy signal whose price and time projections expired on 9/16/09 and 9/25/09, respectively.
So, despite the fears of general stock market declines, an oversold US Dollar, huge short positions in gold by commercial interests, and another deflationary gold stock plunge, SKI is close to obtaining the last piece of an extremely bullish index pattern that has occurred during the major gold stocks rises over the past 36 years! This would be an extremely high probability situation.
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.