Current USERX price = 13.45, Up 24 cents (1.8%) 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 SKI Report, described how the long-term bull market remained intact, but that the harsh decline into 9/25/20 at USERX 12.75 had just missed generating a bullish index pattern because the 35-39 index’s sell signal had occurred one day BEFORE a supportive 16-20 index buy signal. The bullish case needed a rise to a new 35-39 index buy signal on a continuing rise (as USERX rises above the prices from 35-39 trading days earlier).
After the last report, the gold stocks declined but surged 6% higher on 10/09/20. That began to move the 35-39 index towards its needed buy signal. The index signal did generate on 10/14/20 for execution the next day. Therefore, Jeff recommended and did buy (what had been previously sold) on 10/15/20 at USERX 13.93. The gold stocks were also just above the prices from 16-20 trading days earlier, so the 16-20 index was about to generate its resistance sell signal. During past bull markets since 1974, the market has risen through such sell signals for a new intermediate-term bullish phase.
But this time, the historical precedent did not persist. Last week’s decline went back below the 35-39 index for a sell. That IS the way that the indices and the markets interact: If the buy signal is wrong, the market usually quickly declines into a sell signal to stop-out the buy signal. Therefore, when the 35-39 index executed its sell signal on 10/22/20 at USERX 13.61, a quick 2.5% loss was recorded. Index signals regularly mark the technical points (lows, highs, break-outs, and break-downs). The 35-39 index’s “buy” signal had unfortunately generated at an exact high on 10/14/20 at USERX 14.11.
It’s possible for last Thursday’s 35-39 index sell signal to have marked a low. The continuing decline on last Friday (10/23/20) argues against that, but index signals can miss highs or lows by a day. The historical probabilities over the past 46 years show that index signals mark highs and lows with a mean of zero (= exact) and a standard deviation of 1 trading day. Hence, there’s a 95% probability that the technical point occurs within plus or minus 2 trading days from the signal’s execution.
Now, due to the 35-39 index’s sell signal, a continuing short-term decline is likely, probably to below the 9/25/20 low of USERX 12.75. Friday’s decline to 13.45 began to move the 16-20 index towards its new buy signal. That contrarian index buys on declines and sells on rises. The simple index math shows that it would take at least a few trading days to generate the 16-20 index’s buy signal. The harder the decline, the greater the probability that the next 16-20 index buy signal would mark a low (“catch the falling knife”). It would likely be THE intermediate-term low from the 8/05/20-8/06/20 high in the gold stocks and gold. A new 35-39 index buy signal on a rise would be a subsequent disciplined buy-point despite the quick failure of the 35-39 index’s recent buy signal. SKI remains long-term bullish via the 218-222 index buy signal on 3/27/20 at 7.08 and the 92-96 index’s buy signal on 4/27/20 at 9.65.
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.