Current USERX price = 12.09, Down 90 cents (7.5%) 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 11/11/12, continued to describe how bull market corrections from the 9/21/12 high go down to the 16-20 index buy signal and often continue down to the 35-39 index. That Report was bullish because all prior bull markets (since 1974) had yielded a rise into a 16-20 index sell signal within 20 trading days from the 16-20 index buy signal at around break-even or a profit. At the time of that last SKI Report, it was 17 trading days from the 10/15/12 buy signal on the 16-20 index at USERX 13.11. Therefore, 3 more trading days remained in the 20-day period, the decline had reached the second target 35-39 index, and a quick rise was expected. That Report also described how the initial correction in prior bull markets had typically gone down to or below the initial bull market breakout level (with the initial bull market 92-96 index buy signal occurring at USERX 12.18 on 9/06/12 and on 9/05/12 at HUI 458.11). And that prior Report also noted that a SKI 221 index buy signal is required for a bull market and how that index had executed its buy signal on 11/02/12, as gold plunged $40, with Jeff buying gold at $1677. It concluded that the bears (not Jeff) needed a quick plunge to sell the 221 index.
That Report’s bullishness was quickly proven to be WRONG for the gold stocks (yet “crazily/luckily”/”perfectly”, Jeff’s 11/02/12 gold buy was the corrective low for gold bullion, so far). The gold stocks declined/plunged an additional 9% over the next 4 trading days, with USERX dropping to 11.84 on 11/15/12. The strong decline occurred just as the 20-day period ended in failure. And that decline also sold the USERX 221 index.
The important issue is whether that decline was “infanticide” (the killing/death of the infant gold stock bull market that became “alive/possible” on the 9/05/12-9/06/12 92-96 index buy signals for the HUI and USERX, respectively). I’m spending 4-5 hours of my Sunday afternoon writing/editing this SKI Report because I enjoy studying the gold stock market using the framework of the indices and reporting on such studies. Yes, I’m also hoping that these Reports will cause readers to subscribe and to learn SKI and the market along with me. These prognostications won’t always be correct (far from “perfection”), but the indices and run patterns have an extremely high probability of marking the “spot/moment/price” for highs, lows, breakdowns, and breakups. It just has not changed for decades.
The USERX 10% decline from 11/08/12 to 11/15/12 “killed” the 221 index. The 221 index generated its sell signal on 11/15/12 (the low so far). The decline also generated a SUPPORTIVE 884 index “sell” signal and hit/touched the HUI’s SUPPORTIVE 663 index. And even more “interestingly”, that decline hit/touched the HUI’s 92-96 index. That 92-96 index generated the potential bull market buy signal in early September. A sell of that index would end the apparent “infant bull market”. But that index was NOT selling, as the HUI dropped to 437.05 and the index’s back prices were 414.54, 427.77, 427.29, 442.73, and 438.01. Jeff “had to” strongly suggest that such a decline to multiple long-term indices would be another chance for a meaningful corrective low within an infant bull market. Plus, the 3 Up and 5 down run pattern into 11/15/12 had a rather high historical probability of marking a low. So Jeff ended up buying more gold stocks on 11/16/12 at USERX 11.95, but only a meager / meaningless / chicken 1% amount of his net worth.
The gold stocks remain on their potential bull market buy signals from 9/05/12-9/06/12. Their behavior since then has been INCONSISTENT with two historical rules for bull markets: (1) They didn’t rise from the last SKI Report into the normal 16-20 index sell signal, plunging on the failure day, and (2) USERX sold the 221 index buy signal that is REQUIRED for a true bull market. The 221 index sell signal is particularly dangerous: A new buy signal is required for a bull market and it will take time for that to have a reasonable chance of occurring.
The case for the continuing “infant bull market” cites several rules that have NOT been broken. First, USERX and the HUI simply plunged to multiple long-term indices on 11/15/12-11/16/12. It’s as if the gold stocks’ behavior has been affected by the long-term indices for the past 4 years: Prices reach a typical low or high based upon the regular SKI indices, but then continue falling/rising until the long-term indices are impacted. The latest example was the decline to the USERX 884 index support at the lows in May and June of this year. Second, as I stated in the prior Report, the initial correction in an infant bull market usually goes down to below the bull market 92-96 index’s buy-in price. That’s all that’s occurred, so far, since 9/06/12. Third, the 92-96 bull market index has not sold, with the HUI’s 92-96 index having been touched, but not selling, at the 1/15/12-16/12 recent low.
The next SKI index signal will either involve: (1) A rise over the next 2 weeks into a 16-20 index resistance sell signal (as prices rise over the declining prices from 16-20 trading days ago; changing each day), or (2) A large decline to the 92-96 index that is about to bottom at the 7/23/12 lows (a large decline over weeks). Jeff’s still favoring some bullishness here, but a new 221 index buy signal will take time.
Did you notice that USERX was unchanged on two days last week when gold was plunging/rising? USERX is manifesting a rare 1 Down and 2 Up generally short-term bearish run pattern into 11/23/12 at USERX 12.44, and then 5 CONSECUTIVE DOWN DAYS into Friday (11/30/12). Such runs down have a high probability of ending at 5 or 6 days down…
Best Wishes, Jeffski
P.S. Yes, I think that the gold stocks “suck”, performing relatively poorly. I never recommend the small gold stocks due to the risk. But that group has always (historically) performed beautifully during real bull markets. Perhaps we’re still in the infancy of such a bull market, but we need the 92-96 index to avoid a sell signal, and for the 221 and 35-39 indices to re-buy.
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 marketin the world (in my opinion). That's the way it's always been.