Current USERX price = 17.77, Down another 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 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.
In the last gold stock SKI Report on 11/25/07, I described how after missing the powerful rise from the August 2007 low, patience was paying off by waiting for the likely decline after the rise was completed: The gold stocks had retreated back to the initial SKI index. That 16-20 index had executed its buy signal on 11/16/07 at USERX 18.72 and its "sibling" index, the 15-19 index, had executed its short-term buy signal the next day, on 11/19/07 at USERX 18.21. Those short-term SKI indices were showing that Time X Price had yielded the first level of price support and indeed, that did mark a short-term low point to within a day (for the 16-20 index) and to the exact day (for the 15-19 index).
And yet, I also wrote in bold-faced type, that I HAD NOT BOUGHT due to several factors, but primarily due to risk management and the fact that historically, the gold stocks don't start their next major rise until they have retreated back to the intermediate-term 35-39 day index. And thankfully, that IS what happened next: After prices rose a few percent and then basically held flat for about two weeks after the short-term index buy signals, the gold stocks fell again to generate that 35-39 index signal that is supposed to mark the next Time X Price point of support. The 35-39 index generated on the exact day of that next low, slightly below the price of the prior low (as it should), on 12/05/07 at USERX 18.20, and executed the next day (12/06/07) at USERX 18.48. SO SKI "WAS BACK" IN PLAY EVEN MORE THAN IN THAT LAST REPORT, and Jeff (that's me) was happier!
Did I buy that signal? STILL NO. Why not? During SKI bull markets, a decline to below the prices from 35-39 trading days earlier usually marks an intermediate-term low and I would be saying, "Buy". But if you've been reading these Updates for 321gold over the past months, or really over the past 1.5 years, you know that despite the fabulous rise off of the August 2007 low, the SKI index patterns and the run patterns have not been appropriate for a true bull market. The one factor that did argue (and still does argue) for a POSSIBLE bull market (ala mid 2005 to mid 2006) is that the SKI system path of indices IS on a 92-96 index buy signal that executed on 9/11/07 at USERX 16.15. Such an index signal is required for a bull market, but does not guarantee that there is a true bull market (where prices double or triple over a year).
Therefore, since I was skeptical that this was (and is) a true bull market, I had to continue to utilize appropriate risk management (i.e., not taking a chance on losing a significant amount of money), and wait for the next intermediate-term SKI index buy signal. Then I would have a rather good stop-loss point. So I still sat in cash, waiting to see if the market would hold those two levels of support marked by the 16-20 index and the 35-39 index signals. The wonderful aspect of getting that 35-39 index sell signal on 12/06/07, was THAT SKI WAS THEN SET UP TO MAKE ME BUY A NEW 35-39 INDEX BUY SIGNAL, so I didn't really have to worry any more about missing most of the next great rise, if it was going to occur (as prices rise back over the prices from 35-39 trading days earlier). During the great bull market surges of the late 1970s, such a 35-39 index buy signal often took about 39 trading days. Currently, the next 35-39 index buy signal MUST be generated within 39 trading days of 12/06/07 IF the rise off of the August 2007 low was the start of a true bull market.
This past week the gold stocks tried to rally during the early part of the week. On Monday (12/10/07), USERX rose back up to 18.72 and touched the 16-20 index. Since that index had bought the decline several weeks earlier, a rise into that index represents resistance and moves the index closer to a sell signal (It buys declines and sells rises). But on Tuesday (12/11/07), the market declined subsequent to the Federal Reserve announcement. In SKI terms, the goldies had risen into resistance on Monday and had been repelled. On Wednesday (12/12/07), the gold stocks rose again to hit the 16-20 index once more and more importantly, prices also hit the 35-39 index. A critical juncture was indicated because if prices had continued to rise for a few more days, a new 35-39 index buy signal would have been generated and I would have been buying. The decline at the end of the week was rather bearish as prices appear to have been firmly rejected from the index resistance and actually fell below the earlier index support signals.
The next SKI signal of importance HAS to be (mathematically), either a new 35-39 index buy signal that is to be bought OR a 92-96 index sell signal that will confirm that the rise from August 2007 was not a true bull market. The smaller precious metals stocks have performed rather poorly in 2007 and did not rise very much off of the August 2007 low. And even though many gold indices and USERX rose to new century highs in November, they have not performed well relative to gold bullion, which sits near $800 an ounce. In the U.S., the gold stocks have been affected as much by the general stock market as by the precious metal itself. It appears that general "risk aversion" has held back many of the gold stocks.
Personal: On the personal side, 2007 was a rather difficult year for me. I've only made about 10% timing the gold stocks, I missed the rise from the August low, and most importantly, my wife experienced severe cervical stenosis. Despite surgery (screwing multiple titanium plates into her neck), cortisone shots, physical therapy, acupressure and massage, she continues to be disabled and in pain. And she also has multiple severely compressed discs in her back that are waiting to be addressed. So I'll be glad when this year is over! 2005-2006 was a banner year and good years tend to be followed by mediocre or bad years (so don't get too happy when you have a great year and vice versa [smile]!)
I hope that your 2007 was better than mine and wish you a warm holiday season, a bright new year, and a massive SKI buy signal in 2008. I almost forgot. The prognostication for 2008 is that USERX will experience a significant decline into a "life run" pattern low (that will reverse the "death run" pattern high of May 2006) and that I'll be buying one day after that low, make a fortune, and buy my wife a new cervical AND lumbar spine...
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 for happiness, health, and prosperity, Jeffski