Current USERX price = 15.66, Up 3.7% 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.
In the last gold stock SKI Report written on Sunday 10/25/09, titled “Gold Stocks: Long-term and Short-term Update”, I described how SKI remained long from the 8/26/09 35-39 index buy signal, but that the intermediate-term buy signal had met its price and time projections (a 17-21% rise) in September and again in October. Historically, prices were supposed to decline to a 35-39 index sell signal over the subsequent 1.5-2 weeks to another potential short-term low. Upon rereading that last Update, I see that I had refrained from stating that historically, that’s what had always occurred with that index pattern. Although it had “always” occurred, there’s never 100% certainty when it comes to human/market behavior.
Nonetheless, the gold stocks did follow the historical precedent and maintained the perfect record. The gold stocks immediately declined 7+% in the 3 trading days after that last Update. Prices declined faster than expected and actually bottomed within one week of the last Update. On a closing basis, the gold stocks bottomed just 3 trading days after the last Update on 10/28/09 (as the HUI completed an interesting 2 Up and 7 Down run pattern when that index fell for 7 consecutive days) and then took several days of sharp up and down moves to form the next short-term bottom.
The sharp nature of that decline caused the SKI indices to miss marking the day of the low, but the up-and-down action for a few days did generate the 16-20 index (short-term oversold) buy signal and the expected 35-39 index sell signal on Monday 11/02/09. That combination of index signals usually marks a low. Note that SKI was selling to complete the intermediate-term rise (a 35-39 index buy) but that was forming the “another potential short-term low” stated in the Update on 10/25/09.
When the market declined properly and sold the 35-39 index, completing that intermediate-term cycle, it opened the opportunity for a new rise. If those signals were marking a low, the next signal should have been a quick new 35-39 index buy signal and then a quick new 16-20 index (short-term overbought) sell signal.
The precious metals complex then experienced a very sharp rise the next day (11/03/09). The rise moved prices back over the 35-39 index and generated a new buy signal on 11/04/09. Therefore, the 35-39 index sold and then quickly re-bought. That is a classically bullish pattern, somewhat similar to the bullish 35-39 index sell and re-buy on 8/20/09 and 8/26/09.
I hope that wasn’t too much technical SKI talk. But I savor the technical part and the indices regularly mark the critical points. There have been a lot of those index signals and critical points this year because the gold stocks have gone up and down 8-15%within a rising channel. The tops of the channel have usually coincided with 16-20 overbought sell signals and the bottoms of the channel have usually coincided with 16-20 index oversold buy signals. But eventually the market always breaks above the short-term sell signals (the top of the channel) OR below the buy signals at the bottom of the channel. That’s what makes for intermediate-term moves.
Currently, the 35-39 index gave its new buy signal and then prices immediately rose to the short-term index sell signals. So the market has moved from one critical point (the prior 16-20 index buy signal) to this next critical point, the 11/10/09 and 11/11/09 short-term index sell signals that have so far marked the top last week. We do have the opportunity to rise through these new short-term sell signals because of that new 35-39 index buy signal. And all of this without too much apparent celebration of the new nominal all-time daily and weekly highs in gold bullion!
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.