Current USERX price = 6.88, Down another 36 cents (5%) 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 9/15/13, described how the gold stocks had declined to a maximum downside point and needed to rise to preserve any chance of a bullish case. The market had declined into a 16-20 index (short-term oversold) buy signal at that time and was about to generate a 35-39 index “sell” signal. The quotes around “sell” indicate that such a double index pattern usually marks a low. If the 35-39 index did not mark a low then the bears were in control. The market’s behavior since that time has been highly technical (psychological), involving multiple critical points in just these past 3 weeks.
The HUI’s 35-39 index “sell” signal executed on the next day (9/16/13) and the USERX 35-39 index “sell” signal executed on the following day (9/17/13). That index pattern (a 16-20 index buy signal and then an almost immediate 35-39 index “sell” signal) usually marks a low, as I was trying to communicate in the last SKI Report. It DID, as prices flew higher the next day when the U.S. Federal Reserve announcement supposedly surprised the market with the “no tapering” statement. That strong rise (7+%) caused Jeff to send an Update stating that a short-term decline was in order because USERX was forming an important run pattern: A 1 Down and 2 Up Surge. Such run patterns mark short-term highs, but have always been intermediate-term bullish (12 for 12 since 1974; rather rare, no?). The rise began to move the 35-39 index towards the needed/expected buy signal, but such buy signals usually execute close to (but not exactly at) the next low in a few days. The gold stocks did then decline and barely, barely, barely, generated the 35-39 index buy signal on 9/24/13. Prices rose the next day and the SKI technical stage was set for a continuing rise: The gold stocks needed to rise very soon because the prices from 35-39 trading days earlier were about to skyrocket. Check the USERX prices from 35-39 trading days earlier that were coming into the index on 9/25/13 and the ensuing days. Most folks don’t want to do the work to do so and I guess that is normal human behavior. That’s why I charge a little for my work.
After the 35-39 index buy signal that generated on 9/24/13 (and should have marked a low), the gold stocks have drifted lower. Since the index’s back prices were in the process of flying higher from the early August 2013 low (exactly), a strong rise was needed (and expected) last week to stay above those rising index back prices. IT DID NOT HAPPEN. The gold stocks fell on this past Tuesday (10/01/13) and the 35-39 index was about to sell. Prices are supposed to decline into such sell signals. They did. THE 35-39 INDEX SOLD ON THIS PAST FRIDAY. THE DAY IS TECHNICALLY “SKI-MARKED” AS THE NEXT CRITICAL POINT. It just so happens to coincide with the time that I’m supposed to write this next 321gold SKI Report.
This new 35-39 index sell signal on Friday (10/04/13) should mark the next critical point (probably exactly). There isn’t any index support below the market. It’s either a low or a protracted decline to new multi-year lows is about to occur. If it’s the low, the market has set up the SKI indices for an actual potential bull market because a rise (amount/time reserved for subscribers) will yield the rare 92-96 index bull market buy signal. In the last Report I wrote how the market had avoided its chance at a real bull market. The behavior over the past 3 weeks somehow resurrected the possibility of a bull market, but that would require a rise (literally, “now”). The charts for USERX and gold bullion are purely bearish. I won’t go into the details here, but they are traditionally bearish. I prefer to avoid extreme statements because they are usually wrong, but if the June 2013 low was the multi-year low, the gold stocks need to rise (“now”) and I cannot predict that such a rise will occur. The USERX run patterns are all bullish (e.g., the intermediate-term bullish 1 Down and 2 Up Surge pattern on 9/18/13, the Mini-Life Run low 2 Up and 5 Down collapse at the end of June 2013, and the very long-term Life Run low in 2008), but remember those Death Run tops in Silver and GDXJ in 2011 that have maintained the bearishness during the past 2 years. Literally and probably exactly, “here we go”.
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.