Current USERX price = 5.27, Down 14 cents (2.6%) 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 9/16/14, concluded that although the gold stocks had risen from their multi-year low on 11/05/14, 16-20 index resistance would begin to be hit if USERX rose to “over XXX on 11/21/14”. Furthermore, if USERX could get over the 16-20 index, the bullish intermediate-term scenario should be occurring as the gold stocks should either: (1) Decline quickly (even to new multi-year lows) to generate a 16-20 index buy signal for a buyable bottom, or (2) Continue rising to the 35-39 index’s major resistance.
The XXX price was USERX 5.43, the price entering the 16-20 index on 11/21/14 from 10/30/14 (16 trading days earlier). In fact, not surprisingly, USERX did get over that price on 11/21/14 by rising to 5.68. Resistance had been hit/touched and the question at that time was whether the gold stocks could hold up long enough to not just hit/touch the 16-20 index’s resistance, but actually generate the index’s sell signal. Again, if that 16-20 index sell signal would generate, there was likely to be support beneath the market via a 16-20 index buy signal on a decline OR the gold stocks could continue to rise to the next level of major resistance, the 35-39 index.
The gold stocks then continued to rise during the following week, but just by a little. USERX rose to 5.78 on 11/25/14. As per the last 321gold SKI Report, that 5.78 price last occurred on 10/29/14 when USERX fell one penny below the 221 index and a huge decline was expected and did occur. Now, USERX had simply risen back to that exact breakdown point. The HUI generated its 16-20 index sell signal the next day (11/26/14) and the index resistance held as the gold stocks plunged 8-9% on the next trading day (11/28/14). Nonetheless, that large daily decline wasn’t quite enough to prevent USERX from generating its 16-20 index sell signal for execution on this past Monday (12/01/14).
So the HUI and USERX 16-20 indices had generated their resistance sell signals. As per the last SKI Report, once that index signal generated, there should be support below the market via a 16-20 index buy signal (if the market declined to below the 16-20 index). But there was one caveat that I did not describe in the last SKI Report because it is so rare.
This will probably cause readers’ brains to glaze over, but the caveat is that if the subsequent decline to below the 16-20 index occurs IMMEDIATELY after the 16-20 index’s sell signal, the buy signal is invalid and a major decline has historically followed. If USERX declined 6.5% on Monday, 12/01/14, the USERX 16-20 index would have generated such an immediate “buy” signal and another Armageddon-type decline would have been forecast. Gold collapsed again on the Sunday evening leading into this past Monday (12/01/14) and if that decline had been maintained, USERX was likely to decline that 6.5+% to initiate the next Armageddon-type decline. But remarkably, gold then reversed and rose about $80 into the close on that Monday. That took gold to a new rebound high from the November 2014 low, but USERX only recovered about half of its losses from the prior Friday’s collapse.
Gold’s remarkable recovery on 12/01/14 caused many analysts to become bullish. Yes, that rise avoided the immediate and therefore invalid 16-20 index buy signal that would have forecast “Armageddon”, but remember that the USERX 16-20 index’s resistance sell signal was executing on that day and appeared to mark some type of top for gold bullion.
Gold and the gold stocks have declined again from this past Monday’s remarkable recovery. That’s not surprising based upon USERX’s 16-20 index’s resistance signal. The gold stocks are significantly lower (7%) than when index resistance first began to be hit/touched on 11/21/14, as per the last 321gold SKI Report. But the market did generate the actual 16-20 index sell signal and then remarkably avoided the immediate (and invalid) 16-20 index buy signal. That leaves SKI in the same position as was described in the last 321gold SKI Report: A further decline will yield a supportive/buyable 16-20 index buy signal during this coming week OR the gold stocks can avoid the index signal (because the supportive index has just been hit/touched on this past Friday’s decline) and rise to the resistance 35-39 index over the next several weeks (the specific date is again reserved for subscribers, but look back 35-39 trading days to see the approaching time and price resistance) that should mark even more significant resistance.
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.