Current USERX price = 18.86, UP another 6.6% since the last report 3 weeks ago. What a surge!
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 the most informative gold site, 321gold, since its inception approximately six years ago. 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 32 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 at http://www.skigoldstocks.com/about.php. 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 SKI Report on 9/22/07 occurred after a 25% upward explosion in the gold stocks from their lows on August 16th, 2007. As per each of these free Updates, I tried to provide solid hints on the SKI System's current view of the gold stocks and the precious metals market. The emboldened, key statements from the last Special Report were:
Despite that rather clear warning, the gold stocks have continued to advance over the past three weeks. USERX (the gold stock mutual fund) now sits at new highs for the CENTURY, surpassing its May 2006 high by approximately 5%. Gold bullion has had, I believe, its highest monthly close in history. And yet, I was looking back at April 19th, 2006, the "good old days of the last true SKI bull". USERX closed at 16.36. I sent a sell alert that morning as the run pattern was 1 Down and 5 Up. Gold dropped about $15 the next day. But note that gold was around $630. Now gold is about $118 higher. USERX is currently 15% higher than it was 1.5 years ago while gold is almost 19% higher. Aren't the gold stocks supposed to lead gold or at least out-perform gold on a percentage basis? Fundamentalists will state that the poor stock performance is due to high oil prices (a major cost for mining companies), but oil prices were high in the late 1970s and the mining shares soared. Is the stocks' 1.5 year relative underperformance an aberration or is it predictive? I don't have an answer to that question. I was just providing it for perspective and some food-for-thought.
The SKI indices show that it IS possible that a new bull market phase (where prices go higher and higher over a year and settle at a new higher level) began on 9/11/07, but the system continues to indicate that "several technical factors just aren't right". SKI bull markets are marked by a 92-96 index buy signal that occurs in a specific manner so that it is "On the System Path". A detailed description of this pattern is included in the article "About SKI" at http://www.skigoldstocks.com/about.php. A true bull requires much more than prices simply moving over a certain price level. Basically, prices must fall to generate a 92-96 index sell signal that marks the LOW and then prices immediately rise enough to generate the true buy signal and the bull market period begins (ala the bull period beginning on 8/09/05 for SKI).
SKI IS on a 92-96 index buy signal since 9/12/07 and prices HAVE risen 17% since then, but if you can follow the last paragraph's description, prices needed to decline and sell this initial 92-96 index buy signal and THEN generate the true buy signal at lower prices. That did not happen because prices have simply gone sideways and then risen since the last report three weeks ago.
I had been expecting that prices would be declining by this time. Prices have risen! The SKI technical system is on a potential bull market 92-96 index signal and prices have risen to new century highs. Fundamental factors appear to be extremely bullish for the precious metals as the Federal Reserve appears to have abandoned a U.S. dollar that sits near/at all-time lows. And yet, the death run pattern from the high in May 2006 has not been adequately resolved, the SKI index pattern doesn't fit with the past 34 years of index patterns, and the current short-term run pattern is one day down and four days up into this past Friday (10/12/07).
If you are interested in following and learning more about the SKI indices, I'll write another Report for 321gold 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. 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.
Best wishes, Jeff