TraderInterviews.com: Hello everybody and welcome back to www.TraderInterviews.com; this is Tim Bourquin. So, we’re going to do something a little bit different this week. We’re going to be speaking with Jordan Roy Byrne and we’re going to talk to him about, first of all his thoughts on gold because he writes a newsletter on gold, but he’s also a charter market technician. We’re going to talk a lot about technical analysis here in the market and some things that you can use to maybe look at the market in a little bit different way than you’ve considered doing in the past. And so we’re going to talk to him about a whole variety issues and he’s joined us on the phone here today. So, Jordan, thanks very much for being here.

Jordan Roy-Byrne: Well thank you Tim, it’s my pleasure.

TraderInterviews.com: Well, I know chartered market technician is not an easy course. You’ve worked hard to get that. I’ll ask you straight up here, I know a lot of traders consider taking that course just for the knowledge of it, was it worthwhile with all that hard work?

Jordan Roy-Byrne: Well, I think it was very worthwhile. Traders and technicians they tend not to be recognized enough compared to a lot of people on the street. They come from a more fundamental background I think. So that’s why I found the CMT really appealing. I mean, without the CMT I kind of felt like how am I going to be recognized, you know I’m a technician, but anybody can say they’re a technician, and when you have the CMT behind your name I think it gives you a lot of credibility and I’m thankful that the MTA, the Market Technicians Association, has a program like that and I would encourage anybody who use the technical analysis and anybody who’s interested in the markets to look into that and go after that. I think it’s very fulfilling. I think it’s definitely worth your time.

TraderInterviews.com: So, a lot of people to get that if they’re going to be doing a newsletter or maybe they’re a financial planner of sorts, but if you don’t want to sell anything, if you just want to increase your own ability to make money for your own account as a trader, is it still worthwhile doing?

Jordan Roy-Byrne: I think the books are still worthwhile. The study materials obviously there were some by John Murphy. There was a book by Martin Pring, I think it was called Investment Psychology Explained and also the Edwards and McGee book which is a classic. If you haven’t read any of those, you’re kind of a beginner, you just want to be more of a trader then I would look at those books and try and read a few of them. I think that’s a good idea, you don’t necessarily have to go after the CMT and go through the entire program.

TraderInterviews.com: Well, let’s talk about some of the technical analysis you’re using right now in the markets. Do you have on a generic chart that you would look at gold or some other sector, are there some general things that are kind of always on your charts that you like to watch, any indicators that sort of thing?

Jordan Roy-Byrne: Well, that’s a good question because I could really go anywhere with that. I mean, I tend to use a lot of different things and I guess I kind of like to look at maybe a one-year chart or an eight- or nine-month chart with some moving averages. One moving average I really like is the 400-day moving average, which is equivalent to about the 80-week moving average and also the 20-month moving average. And if you just go back the last 10 years, it’s really amazing on a number of different charts, have the 20-month moving average and so like looking at a daily chart that’s the 400-day moving average, how it’s been a key level just over and over again and I mean you can look at that moving average line on the S&P and on gold stocks and on gold and just on a number of different charts. So that’s one thing I like to look at, Elliot Wave sometimes. Just a common about Elliot Wave, I wouldn’t say that it works all the time, but I think it’s useful when you see patterns developing. In other words, like if you see a triangle, that’s typically a fourth wave. So if you see a triangle, then that means the market could be breaking out and making the final high. And also if you’re looking at a consolidation that looks like a bull flag or a bear flag for that matter, that tends to be a second wave, so in flags typically lead to a very powerful move, so that’s something to watch. Like, for example, what looks like on treasuries right now, on the yield that I should say, it looks like we’re making a bullish flag and so that could imply that over the next six or nine months we could see a major move higher in yields. And finally, this is kind of a long answer, but one thing I really like to look at is intermarket analysis and ratio charts, and comparing how markets perform against one another. Marc Faber, who a lot of people know and follow, of course he’s all over the media. He says, now with interest rates so low it’s very hard to value everything and you look back not just now but in the past 10 or 15 years the monetary policy has been very easy, interest rates are historically low. And when you look at that, it’s very difficult to value things, I mean who’s to say that stocks are expensive right now or gold is expensive. And so one way you can look at all those things is to see how is gold performing against the S&P, how is gold performing against commodities, how is this sector performing against gold, how is the dollar doing compared to this currency and that currency. And so I think that can really tell you what’s really happening in the market. Is it something just being dragged higher with everything else or is it really moving up on its own because it’s outperforming everything else.

TraderInterviews.com: You specialize in gold and silver, what markets do you feel kind of really correlate well or that really do some good in the market analysis to give you an idea about where gold and silver is headed outside of that?

Jordan Roy-Byrne: Well, obviously with gold and silver, it would be the dollar, although it seems like a lot of people like to be contrarians these days. By one kind of contrarian thing with gold and silver these days is I’m not so much of a dollar bear. I think that you have to watch how gold and silver are performing against the other currencies. Now, just look at what happened since the last year the last two years, actually I was looking at some performance charts over the last couple of days, maybe like a six-month period or a one year period, basically periods in which the dollar has been flat. And over those periods gold has still performed very well. But I think as far as intermarket analysis, in regards to gold I would say, I like follow treasuries in addition to following the currencies and commodities, but gold tends to leave the commodities. So as far as gold and what it’s doing right now, it kind of looks like it’s moving on its own merits. And so that makes it a little difficult to compare to other markets. But as far as the gold stocks, this is actually where intermarket analysis has been really helpful for me. Gold stocks and the leverage that they have or don’t have is more correlated to the real price of gold, that’s more correlated to how gold is performing against things like commodities and stocks and base metals. And so, a couple of years ago at 2007 to 2008 or even back in 2006 and in 2007 where gold was doing well, but the gold and silver stocks were not performing as well, and the reason was because we had general inflation and energy prices were rising hugely and energy prices, I should say oil prices actually, the reason why oil is important because oil actually comprises 25% of the cost of gold mining. So, if you look in the last year or so, one reason why gold stocks have really rocketed back up is because oil got cut in half or even fell more than that, and so therefore the cost of producing gold have gotten so much cheaper and you look at the price of gold and it’s back above it’s peak in 2008, so intermarket analysis can be very helpful when you’re looking at specifically the mining stocks.

TraderInterviews.com: Now, I know our listeners are going be furious of me if I don’t ask this question because a lot of them are gold bugs. What is technical analysis telling you right now about forming an opinion to where gold is headed from here?

Jordan Roy-Byrne: You know since I do edit a gold and silver newsletter, I could go on about that and I’ll try and condense my answer, but in the very long term if you just look at monthly closes dating back to the late ’70s when you just look at monthly closes, basically the huge decline we saw in 2008 all that happened is it was re-testing the monthly closing high, which was I think 700 or 730 back in 1980. So then we broke above that in 2008, early 2008, we had this decline and so all that decline did it was just re-testing what was the major breakout. And this cup and handle which dates back to 1980 I think I just realized if you look at the target, the arithmetic target for that is I think about 1210 or 1215 and that’s really why we had the recent top that we did. If you look at the logarithmic target that’s about 2,000 and so that’s my next target, and I would just point out when you have a breakout out of a really long term base, a 20 or 30 long term base, the market really tends to move a lot higher over the next few years. A lot of people know about the Dow Jones consolidation from 66 to 82 and had a breakout and then it came back down and re-test it. And then it went all the way up to 2,700 by 1987, and oil is another great example, where it was trading from I think 10 to 40 and then it breaks above 40 and several years later it goes all the way up to 148. And so I think with gold we’re kind of, if you give it a very long term view, it’s very bullish over the next 12 to 18 months. In the very short time, what I’m looking at it’s kind of difficult to describe, but if you could draw a long term channel line connecting, I think it was a spike in 1998 or 1999, connect that spike to the spike in 2006. If you just imagine that line, we just got above that line in the last few months and where that support on that line is right now it’s about at 1115 and so the bounce we had early this week basically it was coming from support of that trim line. And so if we can hold 1110 or 1115, if we can stay above that on a weekly closing basis over the next few weeks, then I think that’s going to imply another strong move up to perhaps 1500 in the first quarter of next year. The alternative view would be that if we break below that trim line and go below 1100, then we’re probably going to have a longer correction consolidation, but I don’t see gold going below 1,050 or 1,000. I’m really not worried about that. I think the worst case scenario here; the realistic worst case scenario would probably prolonged consolidation for at least a few months.

TraderInterviews.com: How important are announcements like PPI these days in terms of monitoring inflation and that bearing that that has on gold?

Jordan Roy-Byrne: I don’t tend to follow a lot of that stuff. I tend to follow how, like I was saying before with intermarket analysis. I like to follow how the other markets react and I feel that if you look over the year or so gold is starting to move on it’s own, and I think that a lot of the people who are involved in gold they’re not worried about those types of things; however, I do think that when you get a bearish statistic or whatever that can certainly drop gold down on $20 or perhaps $40 if it’s really bad, but I don’t think something like that is going to even reverse the short term trend I guess. In other words, I tend to have the view that news isn’t terribly important.

TraderInterviews.com: Your preferred vehicle of trading gold, do you like ETFs or you talked about mining stocks, what do you typically like to do?

Jordan Roy-Byrne: I like to trade the stocks. I mean, if you can find good companies that have good fundamentals and there are good values, I think that’s really the best way to play gold and get your leverage. I think futures are too dangerous for most people. GLD is a good trading vehicle, but I don’t think it’s a substitute for holding gold as insurance and just back to the mining stocks, it’s a very cyclical business and sometimes a company will be showing great value and then six months later it won’t. I’m still holding a little bit of one stock and I’ve been holding it for a year or two and the company has yet to go into production, but up until a couple of months ago they were waiting for about a year to get this final permit to go into production and basically the stock had in priced in production and as soon as they got the final permit the stocks shot up because they’re pricing in the production and so in an update I did about a month ago, I was telling my subscribers, it’s important to note that the stock has shot up, but the company hasn’t been gone into production yet. So, production has already priced in and therefore the risk is in the stock. But if you look back three or six months ago, there wasn’t risk in the stocks. So, I think, when trading the mining stock, it’s very important not to chase stocks that have already gone up two, three, four, five times. It’s very important to look for things with good fundamentals, the things that haven’t moved yet and you start to see improving technicals, I think that’s really the way to go instead of buying stocks that are already pricing in good news because then when you get bad news they can get hit 20% in the day very quickly.

TraderInterviews.com: When you have to trade the mining stocks though you’re inviting in a whole lot other plethora of things you have to worry about in terms of just the stock itself whether that’d be who knows CEO fraud or things that are outside of just worrying about the price of gold by itself, that’s not a concern for you?

Jordan Roy-Byrne: Not really. I mean, as long as you focus on established companies, I obviously like the smaller companies because they can offer a lot of leverage and a lot of profits very quickly, but I like to look at the smaller companies that have just began producing or the ones that are very close to producing. If you’re looking at the ones that their exploration I think those can be very dangerous and just to go back to my last answer, I think the way you help yourself to try and delegate those risks is by buying value. If a company is cheap and there’s bad news, you’re not going to get hit that hard compared to I mean if you’re buying a stock that’s hardly gone up a lot. I mean you’re holding it I think that’s when you’re inviting those risks into play. And so that’s another reason why I think gold stocks are great trading vehicle for the people that like to trade because they move very quickly up and down, both ways. And even those that are long term investors playing those stocks, I still think that you have to take a little bit of your position and trade it to some degree because they’re so volatile.

TraderInterviews.com: Why specialize in gold and silver? What was it about that market that attracted you to start doing a report about it?

Jordan Roy-Byrne: Well, what attracted me is that in a bull market that’s the number one attraction. I think as far as trading the best thing I don’t know who said it, but trade with the trend or invest with the trend. And so, I think, if you’re trading and investing in the secular bull market like that, your odds for success are going to be much higher than if you’re trading against the trend. And so that’s what really interested me is that I believe gold and silver in a bull market I think they’re going a lot higher over the next couple of years and I was basically charting these stocks and following them so much and I thought to myself I don’t think there’s anybody who has a newsletter out there who’s just doing the technicals on a lot of these stocks. And so I did it a lot in my time trying to pick stocks for myself and so I felt like starting a newsletter would be a great way to help people out and obviously I think it’s going to be a hot sector in the years to come.

TraderInterviews.com: Who’s the typical subscriber of the newsletter? I mean, who kind of to you is your ideal person that you’re writing for?

Jordan Roy-Byrne: I like to go after I guess self-directed investors. On my sign up page, I talk about who should sign up and who shouldn’t sign up, and I’m not trying to tell people exactly what to buy or what they should be doing. I basically give them a lot of research and at the same time, I recommend some companies that fundamentally I like and I try and help people decide when to take a little bit off the table and now is the time to add. So someone who basically makes around decisions and has a good bit of knowledge about the market and about gold and silver stocks.

TraderInterviews.com: All right and then finally, where can somebody find this? I know it’s Wall St. Cheat Sheet, but maybe you can give the URL.

Jordan Roy-Byrne: It’s also at the dailygold.com/newsletter. You can go to the dailygold.com and there should be a link to the newsletter page. And the other thing that I do want to mention about, our newsletter in addition to just doing technical analysis on the stocks, we also look at put/call ratios on the largest gold and silver stocks, and I use the put/calls from the International Securities Exchange because I believe they have a way of taking out firm trades and member firm trades, and those types of things. In other words, what they’re looking to do with their options tracking, they’re trying to track and look at sentiment. And it’s very interesting to me that these put/call ratios have actually been giving pretty strong signals. When the put/call has been rising on a certain stock for several days and then it spikes higher, that often signals a bottom. A good example is on GLD, I think I have to go back about a month or two, but basically when it began it’s a very strong run, the put/call ratio on GLD was rising very strongly into that bottom, and I’ll throw it out there, but right now it’s basically kind of been flat. So, technically, I see some support for gold and silver on the charts, but I think they’re going to go a little bit lower because the GLD and the SLV options activities that I’m watching it doesn’t show enough fear and skepticism right now that would say how people are afraid this could be a bottom of this correction.

TraderInterviews.com: Yeah. Gold does seem to be more, I don’t know if that’s true or not, maybe just feels like that way but it’s more susceptible to sentiment for whatever reason, all markets are of course are fear and greed and all of that, but gold for whatever reason people really concentrate on what people feel about where that’s going and it really seems they have a lot of bearing on it.

Jordan Roy-Byrne: Yeah. I think that’s a great point not just or probably especially for gold and silver but also for commodities in general they tend to be more volatile markets and more emotional markets and so that’s why analysis can work very well with that. And also why it’s good for trading because you have the volatility there on both sides.

TraderInterviews.com: All right, Jordan. Thanks for your time. Listeners you can find Jordan’s newsletter at www.WallStCheatSheet.com or at www.thedailygold.com.

If you want to learn more about Gold & Silver, check our new site: The Daily Gold by Jordan Roy-Byrne CMT.