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89-ICT Mentorship Core Content - Month 10 - Commitment Of Traders

Last modified by Drunk Monkey on 2022-10-17 10:11
1 00:00:08,130 --> 00:00:16,050 ICT: Can we talk about the commodity markets it's very important that you read this disclaimers. Everything that's been discussed in this segment of our
2 00:00:16,050 --> 00:00:28,680 discussion on commodities. Any trade, discussion or idea, or concept should be viewed in light of a paper trade, not an actual trade. I'm not a CTA. So I'm not
3 00:00:28,680 --> 00:00:36,780 licensed to get trade advice about commodities. But I'm sharing ideas on how I've looked at the commodity market over the last 20 plus years. And where I've
4 00:00:36,780 --> 00:00:41,160 seen consistency finding directional bias and Support Resistance ideas.
5 00:00:48,869 --> 00:00:59,579 Okay, alright, so we are in the first of the June 2017, content ICT mentorship. This is ICT commodity trading Lesson One Commitment of Traders how I use the
6 00:00:59,579 --> 00:01:10,409 data. Okay, and first thing we're gonna be looking at is the raw data. Now when we look at the commitment of traders report, what is that? Well, the raw data
7 00:01:10,409 --> 00:01:22,859 comes by way of a weekly report released by the CFTC. And you can find this on www dot CFTC. Gov. And what you want to look for is you want to be looking at
8 00:01:22,859 --> 00:01:32,279 the futures contract only in the short format. And if you do this under the CME, which is the Chicago Mercantile Exchange, we can find the currencies that trade
9 00:01:32,279 --> 00:01:45,929 as kondiles. And one of the calm dials are Japanese yen. And this is the most recent short format, Commitment of Traders report for the Japanese yen. As you
10 00:01:45,929 --> 00:01:55,229 see here, this is just for the Japanese Yen futures contract. Now, the CFTC website gives you the opportunity to pull up the options, positions as well, I'm
11 00:01:55,229 --> 00:02:03,569 not concerning myself with that I never concern myself with that at all. I look at only the futures positions. And you want to be looking in the center column
12 00:02:03,569 --> 00:02:12,479 here where it says commercial. And when you see that commercial area, it's going to give you a little column that says long to the left, and in short to the
13 00:02:12,479 --> 00:02:26,009 right, directly underneath that long column, you'll see that there is 143,450 contracts, that's the commercial long positions. And then to the right of that
14 00:02:26,069 --> 00:02:38,039 underneath the short column, it's 76,426 contracts short, the way we get the net position is we subtract the two to get the difference. And that it's a positive
15 00:02:38,039 --> 00:02:48,239 number, it's net long, if it's a negative number, its net short. In this case, we have 67,024 contracts long that made the difference between the long
16 00:02:48,239 --> 00:03:01,019 positions and the short positions. So there's a net long position of 67,024 contracts long. Now, basically, this tells us nothing about their current
17 00:03:01,049 --> 00:03:06,389 hedging program. So what we had to do is have to look deeper and go behind the numbers and see what it is they've been doing.
18 00:03:11,430 --> 00:03:23,340 Okay, net trade position line chart. And with this chart, we can track the three main classes of traders. And again, you would find this on www dot bar
19 00:03:23,340 --> 00:03:31,950 chart.com. You see me use it many times in the past. And what you're gonna be doing is you're gonna be plotting a daily chart, and you'll be including in the
20 00:03:31,950 --> 00:03:41,190 indicator portion. On the bottom of the chart, you're gonna be adding the net traders position, line chart, and iteration you will be displaying as at least
21 00:03:41,190 --> 00:03:51,780 one year's worth of price action. And the commercial traders are typically on bar chart.com, shown as the red line at the bottom of the chart. The large
22 00:03:51,780 --> 00:04:04,410 traders are shown as in a green line, and the small speculators are always shown in as a blue line. But when we look at this price action against the net traded
23 00:04:04,410 --> 00:04:14,460 position line chart, I want you to visually see the hedging programs by the commercial traders. Now, when I first got into trading, obviously my mentor was
24 00:04:14,460 --> 00:04:23,520 Larry Williams, much like everyone else that's ever come across this material. He's like The Godfather, if you will of the CBOT data. So everything he
25 00:04:23,520 --> 00:04:33,180 mentioned in his 1970 book, how I made a million dollars trading commodities last year, using the commercial information that was like two light years ahead
26 00:04:33,180 --> 00:04:43,200 of everything else. Naturally, everyone flocked to just looking at whether the commercials are net long within that short much like everyone else I found out
27 00:04:43,200 --> 00:04:52,890 by trial and error that it isn't that easy. You gotta go in there and do some more research. I thought clearly by looking at the commercials, if they were
28 00:04:52,890 --> 00:05:04,230 buying too therefore I had to be a buyer too, but because their nature of what they are as a as a participant in the marketplace, they are usually large
29 00:05:04,380 --> 00:05:15,300 corporate producers or users of commodities. And commodities, like a calm doll is the same thing. currencies are a commodity, they're there, they're bought and
30 00:05:15,300 --> 00:05:28,050 sold, they're provided for in terms of allowing global commerce, providing loans, making transactions all over the world. And because there's a difference
31 00:05:28,050 --> 00:05:37,200 of all these countries around the world, there's going to be a change from one currency to the other to do business, or make transactions in another country.
32 00:05:37,620 --> 00:05:52,050 So just like we would look at, for instance, like cocoa for Hershey, where they make a large production of chocolate every day, their number one ingredient is
33 00:05:52,080 --> 00:06:02,070 sugar and cocoa. So if we follow those commodities, you naturally cook cocoa is going to have a lot of fundamental supply and demand factors that go along with
34 00:06:02,070 --> 00:06:10,650 it. And Hershey is going to have a trained accredited staff to track all those things to be able to you keep a closer eye on whether the price is really cheap
35 00:06:10,650 --> 00:06:17,190 or expensive. And if they think it's going to be expensive in the near future, they're gonna be much more aggressive of buying it because they want to lock in
36 00:06:17,190 --> 00:06:27,330 lower prices, because they know at a later time prices go higher. The same thing occurs with currencies. So if we look at the net traders decision line chart, it
37 00:06:27,330 --> 00:06:38,130 gives us a graphic depiction of the overall net basis. In other words, are they above the zero line, or below the zero line? By itself, it doesn't mean
38 00:06:38,130 --> 00:06:45,930 anything. But when we look at the information a little bit closer, in a different light, you'll have a lot better understanding about what they're doing
39 00:06:45,960 --> 00:06:59,160 as a hedger. That brings us to the commercial hedging. So naturally, if we pull up a bar chart.com chart of the Japanese yen, and you put the net traders in
40 00:06:59,160 --> 00:07:09,330 line chart one, the chart itself with about one year's worth of data, this is what you get. So by itself, again, it means absolutely nothing. You can see
41 00:07:09,360 --> 00:07:21,840 between today's present date of June 5 2017, and December of 2016. The commercials, the red line at the bottom of the chart shows that red line above
42 00:07:21,840 --> 00:07:33,450 the zero line, that zero line delineates whether we're net long or net short. So if that red line is above the zero line from December 2016, to present time,
43 00:07:33,480 --> 00:07:34,860 June 2017.
44 00:07:35,280 --> 00:07:46,140 That means that the commercials have been net long for over six months. So what does that mean you buy only just buy doesn't mean you just buy, there's other
45 00:07:46,140 --> 00:07:54,630 things you have to look at. But by itself, it means that they are in a buy program. Okay, so there's a buy program. And then there's hedging programs. The
46 00:07:54,630 --> 00:08:06,570 buy program is a macro perspective or macro program where they focus the bulk of their buying. And while they'll hedge and sell some, there'll be hedging in
47 00:08:06,570 --> 00:08:22,890 prices by selling the shorter term buy program can be seen by looking at the 12 to six months duration. So in other words, we look back a year to see what
48 00:08:22,890 --> 00:08:34,020 they've done the highest net long position and the lowest net long position they've had, and the lowest net short position and the highest net short
49 00:08:34,020 --> 00:08:43,170 position they've had. So we break the market down in two categories. What was their action above that zero line as a whole, what was the highest reading and
50 00:08:43,170 --> 00:08:50,190 the lowest reading while above the zero line, and what was the highest reading and the lowest reading below the zero line. So there's a buy program when
51 00:08:50,190 --> 00:08:57,390 they're above the zero line and a sell program when they're below it. But there's also hedging that goes on commercial hedging programs that we need to be
52 00:08:57,390 --> 00:09:04,500 aware of, and you can track them by using this information. But you have to look at it differently. You can't look at it like this, because this is what retail
53 00:09:04,500 --> 00:09:13,860 sees. Obviously, retail isn't going to have the true perspective on what price is doing from a commercial or institutional perspective. So what I have to do is
54 00:09:13,860 --> 00:09:21,900 change your perspective on how we look at it. So let's take a look at it closer now. So what we're focusing on here is the bottom of the chart, these three
55 00:09:21,900 --> 00:09:31,110 lines here. Again, they represent the green line is the large speculators, big large funds, or big private traders that have a lot of position size. Small
56 00:09:31,110 --> 00:09:40,320 speculators is the blue line that usually lists the public, they have no idea what's going on. And then the commodity commercials or large speculators in
57 00:09:40,320 --> 00:09:49,860 terms of like a commercial user or producer of a commodity. In this case, if it's a bank, okay, or lending institution, they would be in that red line. So
58 00:09:49,860 --> 00:09:55,410 that red line is really what we're gonna be tracking. We're only interested in that line. We don't care what the green line is, because it's always going to be
59 00:09:55,410 --> 00:10:03,660 diametrically opposed to the actions or positions of that other red line. And the blue line we could care less about because that's the new street money, less
60 00:10:03,660 --> 00:10:14,430 informed crowd. So what I've done here is I've removed, okay by way of paint. And you can do this if you want to. But it's not necessary. Once you understand
61 00:10:14,430 --> 00:10:21,720 the procedure or process that you go through by looking at price, you won't need to do this. Over time, you're just you're I will be trained to be able to look
62 00:10:21,720 --> 00:10:30,570 at this and be able to see it on its own. And you'll know just by looking at a standard MetaTrader says chart, it'll jump off at that quick first glance,
63 00:10:30,600 --> 00:10:37,230 you'll see exactly what's going on without having to do all this new acrobatics, I'm going to show you with removing the lines with paint, it's not necessary.
64 00:10:37,260 --> 00:10:46,320 But I'll say this before we go into it. For those individuals that really want to have this data and be able to use it like this and see it graphically, you
65 00:10:46,320 --> 00:10:52,980 can start collecting the data. And you can download historical data for all the commodities that you want to track. And for those individuals that are in here
66 00:10:53,010 --> 00:11:03,000 that are only interested in the currency markets, if you'd like your favorite pairs download historical data about the net traders decision for that
67 00:11:03,000 --> 00:11:05,430 particular currency units, for instance, say us Japanese yen, you
68 00:11:05,430 --> 00:11:15,390 want to be a specialist. And you can download years worth of data on co2 data and plot the commercials, net long positions and net short positions. And it
69 00:11:15,390 --> 00:11:23,460 would look like this, he could plot it with Excel, something like that. And I'm certain some of you guys that are really crackerjack with programming for Mt
70 00:11:23,460 --> 00:11:32,370 four, you could probably create an indicator that does this, where it plots the net traders position for the commercials only that way you can get a range and
71 00:11:32,400 --> 00:11:38,430 determine what the highest high and the lowest low is in the last six months in the last 12 months and be able to get that range to define that and like we're
72 00:11:38,430 --> 00:11:45,840 going to discuss here. But without having to do all that it's not necessary. But if you want to do it, there's things like that you can do. But what I do is I
73 00:11:45,840 --> 00:11:53,190 quickly look at the chart, and I see it as I'm going to outline here. So obviously, we have about a year's worth of data here. And you can see the red
74 00:11:53,190 --> 00:12:01,950 line is the commercial activity. And right in December, right before it actually December, right like the last week of November, you can see they swung from net
75 00:12:01,950 --> 00:12:14,340 short position below the zero basis line to net long in the last week or so of November 2016, then they've remained above the zero line from that point on to
76 00:12:14,340 --> 00:12:24,300 now. So again, by itself, it doesn't tell us anything. And this is reason why people walk away from co2 data, they say it's useless. It's always hindsight it
77 00:12:24,300 --> 00:12:31,980 can't be used and in terms of being able to have prognostication about what price is going to do. And we're going to dispel that disbelief in this teaching
78 00:12:31,980 --> 00:12:42,330 here. So what we're gonna do is, we're going to focus on when the markets below the zero line, okay, so zero line basis, below zero is when the net position is
79 00:12:42,360 --> 00:12:53,370 bearish or short, the position above the zero line, okay, or the net zero, some basis is going to be bullish, okay, or their net long. When we have those
80 00:12:53,370 --> 00:13:00,270 conditions, there's going to be things that we can do to look for optimal optimal trade entries. Okay, not the optimal trade entry pattern, but for
81 00:13:00,270 --> 00:13:08,640 optimal trade conditions for entries. So we're going to look at this price action segment here. And I want you to follow along with me, okay, we're going
82 00:13:08,640 --> 00:13:15,180 to look in this whole portion of price action a lot closer and use this information, just like we see it here on this chart, we're going to change it
83 00:13:15,180 --> 00:13:24,300 slightly in terms of the perspective, but we were not manipulating the data at all, we're just really zooming in and looking at it from a hedging perspective,
84 00:13:24,300 --> 00:13:32,640 because there's a hedging program that I want you to see in price action that you can track with this net, sum zero line, and whether the commercials are net
85 00:13:32,640 --> 00:13:48,540 long in that short and the activity of their net positions. Okay, so this is January 2016, all the way to January 2017. Okay, and what we're going to do is
86 00:13:48,540 --> 00:13:59,070 we're going to take this entire price action, and we're gonna divide it in two segments, we're going to do the first portion, up to January of 2017. We're
87 00:13:59,070 --> 00:14:09,780 going to start around. Well, beginning of the year 2016, I'm going to break that down. But before we get into it, I want you to look at what price was doing the
88 00:14:09,780 --> 00:14:20,550 whole first half of 2016. If you were looking at that, and obviously we had the benefit of hindsight here, but for the sake of argument, looking at
89 00:14:20,550 --> 00:14:31,980 institutional order flow. Were the bullish or blocks being respected and we're up close candles or what would be deemed as a bearish order block. Are they
90 00:14:31,980 --> 00:14:41,760 being broken? In other words, are we seeing price being supported by discount arrays? Clearly beyond the shadow of a doubt, it's there. So we know the
91 00:14:41,760 --> 00:14:55,230 institutional order flow was bullish from January 2016 or February 2016. When price made that low, and all the way through until around the mid July going
92 00:14:55,230 --> 00:15:05,280 into the summer months. There was a small little pullback that Broke a short term low, and then price resumed higher again. And it had a lot of issues with
93 00:15:05,520 --> 00:15:15,030 getting above the 1.00 level when the Japanese yen, which we'll look at at the end of this teaching, why it struggled with that level and finally reversed. But
94 00:15:15,630 --> 00:15:23,940 we can see how institutional order flow was bullish. Every time a short term low was taken out, price rallied anytime a price trade down into a down close
95 00:15:23,940 --> 00:15:34,290 candle, it was supported as a bullish order block. And all of the premium PD arrays were always broken through, there was no premium effect that was lasting.
96 00:15:35,400 --> 00:15:44,880 But if we look at just the co2 data down here, the commercials the red line that was below the zero line said that would be telling us to do what go short, based
97 00:15:44,880 --> 00:15:55,080 on the traditional perspective of Commitment of Traders. And this is why everyone discounted Larry Williams stuff for a long, long time. And still due to
98 00:15:55,170 --> 00:16:05,490 today. And if you look at how I'm going to show you how to use this information, it takes co T data to lightyears ahead where everyone else doesn't even see it
99 00:16:05,490 --> 00:16:12,030 like this. They don't even they don't interpret price like this. They don't interpret the OT data like this. But this is exactly how you track what they're
100 00:16:12,030 --> 00:16:22,920 hedging programs are. So while they had a sell program, because they're below the zero line, or the zero line basis was bearish because they were below zero
101 00:16:22,920 --> 00:16:33,720 line from January to February 2016, all the way to the last or middle week of November 2016. You can see that graphically with the red line going above the
102 00:16:33,720 --> 00:16:47,340 zero. So while they have a bearish or sell program going on at the time, for many months, they were selling heavily. Okay, as the market was rallying, they
103 00:16:47,340 --> 00:16:55,680 were keeping sell program active, but you can still see institutional order flow being bought. And this is what's going to confuse some of you. Okay, we're going
104 00:16:55,680 --> 00:17:03,510 to cover the details later in this teaching. But for now, what you're focusing on primarily is was the institutional order flow telling you, it's going to tell
105 00:17:03,510 --> 00:17:14,130 you whether there's buying or selling going on by price action alone. What we're going to do is decipher that from a co2 standpoint, okay, and add that filter
106 00:17:14,130 --> 00:17:25,350 process, even though that the co2 data is below the zero line for many months, okay, we can still figure it out. When the commercial step in and do aggressive
107 00:17:25,350 --> 00:17:35,580 hedging and buying even though they're below the zero line or sell program. You can see when they get aggressive and buy and cause price to go higher, while
108 00:17:35,580 --> 00:17:44,700 still keeping the co2 data below the zero line. So anyone tracking the commitment of traders report for the Japanese yen, they're not following along.
109 00:17:45,420 --> 00:17:52,890 In other words, it doesn't look germane to them. It's completely alien. It doesn't make any sense. The Japanese Yen is rallying rallying rallying, but
110 00:17:52,890 --> 00:18:00,630 they're holding a net short position by the commercials. How can that be? What Why is that happening? Well, the commercials, again, they could be banks, they
111 00:18:00,630 --> 00:18:10,110 could be selling currency, providing liquidity, all that's being reflected in these numbers as a net basis. So just because they're below the zero line
112 00:18:10,110 --> 00:18:20,670 doesn't mean that we can't see buying and sell as well, because it can happen on both sides of the marketplace. But anything above the zero line, that's
113 00:18:20,670 --> 00:18:32,160 obviously bullish. And we would have to consider anything below the zero line bearish, but we do not limit ourselves to just focusing on selling only below
114 00:18:32,160 --> 00:18:38,790 the zero line or buying above the zero line because you can do both. The way you decipher it is What does institutional order flow at the time what are the
115 00:18:38,790 --> 00:18:47,400 conditions right now suggesting and price action if both order blocks are being supporting price, any lows that are being taken out reject price as a stop, run
116 00:18:47,400 --> 00:18:55,290 on sell stops, and then all of a sudden rallies and breaks through what would be otherwise deemed as a premium array, then institutional order flows is bullish.
117 00:18:55,590 --> 00:19:08,910 And you can see by programs kick in, in a hedging program, while a larger sell program is underway. And again, let me rephrase that a larger long term sell
118 00:19:08,910 --> 00:19:22,620 program can still have bullish hedging by programs in and you'll see that now as we go through this segment of price action for the Japanese yen. Okay, so what I
119 00:19:22,620 --> 00:19:34,020 have here is I have price trained in on that segment of price. And I've removed the large speculators line and the small speculators line. So that way we can
120 00:19:34,020 --> 00:19:44,550 highlight all of the price action by way of the net traders position line chart on the commercials which is the red line here. Now, I want you to see how price
121 00:19:44,550 --> 00:19:54,180 stayed higher going higher, making higher highs and and finding supported bullish order blocks running out short term lows and then rallying, but finding
122 00:19:54,180 --> 00:20:07,200 their way through any high or premium array. So the institutional order flow all the way through to the middle of August going into September was bullish. But
123 00:20:07,230 --> 00:20:15,120 how do we reconcile this net short position by the commercials because they're below the zero line, it doesn't make any sense. Unless we break it down and use
124 00:20:15,120 --> 00:20:24,240 the six month range and the 12 month range idea of looking for the highest and the lowest reading on their net position by the commercials. We don't care about
125 00:20:24,240 --> 00:20:25,380 what those long term
126 00:20:26,460 --> 00:20:33,510 speculators that are in a blue line. We don't care about the small specs, we don't care about the large specs, we're only caring about what the actions of
127 00:20:33,510 --> 00:20:42,120 this red line is, because it's going to show us and reflect what their hedging program is at the current time. So anytime when you're looking at co2 data, you
128 00:20:42,120 --> 00:20:49,560 want to look at where we're at right now and go back six months, because there's your six month hedging program, they have a 12 month hedging program. So by
129 00:20:49,560 --> 00:20:57,510 blending the two, you can get short term quarterly effect trades. Now think we talked about that there's quarterly effects every three or four months as a
130 00:20:57,510 --> 00:21:08,340 shift in market structure. And the market trades in a sustained move for about two and a half months or so, maybe three months. But every quarter or so of the
131 00:21:08,340 --> 00:21:16,260 year, there's a shift in market structuring. And this helps you find that by looking at the six month range of the highest high and lowest low the commercial
132 00:21:16,350 --> 00:21:26,340 net position has been. That is seen with this shaded area, you can see the highest high and the lowest low is being basically blocked out with that shaded
133 00:21:26,340 --> 00:21:36,540 area. So once you know what that is, you divide that in half, you get that range. So we can go back 12 months, and in six months intervals. But in here,
134 00:21:36,840 --> 00:21:47,130 you can see how the net positions have stayed in a very tight range. Even that can tell us a goldmine worth of information. Look what suddenly happens when you
135 00:21:47,130 --> 00:21:55,950 decipher the information like this. You do not see co2 data like this. And Larry Williams doesn't even do this with co2 data. This is something I looked at price
136 00:21:55,980 --> 00:22:07,590 forever. And I knew there was something going on behind the scenes. And I literally said, You know what if price can trade and trading ranges soakin this
137 00:22:07,590 --> 00:22:18,000 information, but if they're going to be doing buying and selling, it can't be hidden. If that's true, I should see it without looking at the data in terms of
138 00:22:18,060 --> 00:22:29,190 the range or time remember, if the while I applied similar things to this. So I looked at six month intervals and 12 month intervals, three month intervals, for
139 00:22:29,220 --> 00:22:38,610 four months, I'm sorry, four year intervals, three year intervals, two year intervals, one year interval, and then six month intervals. So if you go back
140 00:22:38,610 --> 00:22:46,320 through the data and you look at it like that, you'll get a clearer depiction of what the commercials are actually dealing. Now, if you look at these green
141 00:22:46,350 --> 00:22:55,470 little nodules in here, okay, even though that we're below the zero line, by determining the total range in the last six months in the last 12 months, we can
142 00:22:55,470 --> 00:23:04,740 get every time they're hedging program kicks in, even though there's a larger sell program is underway by keeping the net positions below zero. Their hedging
143 00:23:04,740 --> 00:23:14,220 program can be deciphered by looking at these little nodules, once you determine the range. The first one here, you can see how all that bind took place. The
144 00:23:14,220 --> 00:23:23,610 second one here, you see where they made a low, they're bought off of a bullish order block that was seen in the last week of April, filling in a void. And we
145 00:23:23,610 --> 00:23:31,620 had this area here, where they were buying again, after we've taken out a short term low. It was seen in the last week of June. And price resumed, but then
146 00:23:31,620 --> 00:23:39,240 found long term resistance at that 1.00 level, which we'll look at at the last slide of this presentation. And you'll see why clearly that had struggling point
147 00:23:39,240 --> 00:23:49,290 there. And were finally reversed by breaking a short term low only after trading at that 1.00 Level A few times failing to get above it. And finally breaking
148 00:23:49,290 --> 00:23:59,910 market structure to a downside. And then you can see the commercials finally started building up a larger net long position above the zero line. So the zero
149 00:23:59,910 --> 00:24:08,550 line basis is now bullish. So now they're in a buy program, but they're going to be hedging early, they start doing it early, but they make the highs and the
150 00:24:08,550 --> 00:24:21,360 lows in the market by doing that. Now we're gonna look at the last week or so of November 2016 all the way to present time. And again, I'm gonna counsel you to
151 00:24:21,600 --> 00:24:30,900 look at what the co2 data looks like by plotting a net traded position line chart as everyone else would do with with the information that you would get
152 00:24:30,900 --> 00:24:32,970 with commitment trades reports.
153 00:24:34,079 --> 00:24:41,459 This is what it looks like if you zoomed in on a daily chart. And again, it doesn't tell you much except for the net long and granted they have been sending
154 00:24:41,459 --> 00:24:48,989 the Japanese yen higher as a result of that. But what was institutional order flow as well? Are down candle supporting price when it trades back down to it
155 00:24:49,589 --> 00:24:59,969 are up close candle is being broken as PD arrays or old highs being taken out. And are we seeing support by price moving down into what would be otherwise it
156 00:24:59,999 --> 00:25:11,429 scan array. Yes, we're seeing that all throughout this entire price segment from the midpoint of January, I'm sorry, the midpoint of December, going into the
157 00:25:11,429 --> 00:25:19,499 January, where we made that turning point. Now commercials have really moved to a net long position. Now they're to buy program. But now because we're in a buy
158 00:25:19,499 --> 00:25:28,859 program does that mean it can't sell off, no can have sell offs. But we're going to focus primarily on what is the range the last six months, okay of the
159 00:25:28,859 --> 00:25:37,109 commercial activity. But first, we got to focus on what that looks like. So we're going to take everything down to just a commercial line. And I removed the
160 00:25:37,109 --> 00:25:45,149 small specks line and the large speculators did not manipulate the price or do anything with the indicator, all it did was erased, everything was painted, we
161 00:25:45,149 --> 00:25:54,659 can clearly see what's going on, I want you to look at by taking the information determined the highest high and lowest low in the range, the finding that basis
162 00:25:54,659 --> 00:26:06,209 line creating its own new bases line, we can see where the buying kicks in. And you see nodules kicking in, in January, we can see one in mid March. And we can
163 00:26:06,209 --> 00:26:17,399 see one in the last week of May. And those are the respective time periods where the market sees the greatest advances in price going higher. All through here,
164 00:26:17,879 --> 00:26:27,329 market was bullish, all through here. We're currently bullish as well, if you look at the price of Japanese yen right now, and go to the left in last week of
165 00:26:27,359 --> 00:26:35,309 April this year, you can see there's a fair value gap up here at 9150. So it kind of gives you an insight about where we think, based on what we're talking
166 00:26:35,309 --> 00:26:46,739 about here, where Jeff and Jim might go least on the short term. And we're using the hedging program, as outlined here as a basis for that. So when we look at
167 00:26:46,739 --> 00:26:55,349 commercial hedging, we're not looking just at whether the net lower net short, but that does give us the buy or sell program that they're operating in. But
168 00:26:55,349 --> 00:27:03,899 inside that buy and sell program, or buy and sell program, I should say like that, there are hedging programs that go on because their nature of their
169 00:27:04,349 --> 00:27:15,119 speculation in the marketplace is to lock in good prices for their manufacturing of commodity or a good. And to do that efficiently, they have to make sure
170 00:27:15,119 --> 00:27:25,259 prices are obtained at very discount, or friendly levels. You don't want to be buying if your currency you don't be buying cocoa later on, when you've already
171 00:27:25,259 --> 00:27:30,899 seen fundamentals are suggesting it's gonna be higher six months from now or a year from now, you're not going to be doing all your buying, then you're going
172 00:27:30,899 --> 00:27:41,669 to allocate a lot more money now to buy up stock for that. So that way, when prices go higher, you've made a better return on your investment and keeps cost
173 00:27:41,669 --> 00:27:48,959 low. And that's the nature of hedging. So the same thing happens with the banks and lending institutions, you know, the value of money is going to be
174 00:27:48,959 --> 00:28:00,119 fluctuating all the time. So they're trained accredited staffs that do those types of things, they will invest on buy and sell based on those notions that
175 00:28:00,119 --> 00:28:07,049 their supply and demand factors that they have an assessment on, I'm not smart enough to know what they are, I've never claimed to know that and you're never
176 00:28:07,049 --> 00:28:14,099 gonna know that from me, because I don't know it personally. But I can see what they're doing graphically, and they can't hide it from me. And now because I've
177 00:28:14,099 --> 00:28:21,179 shared it with you, you can do the same thing, there's nothing that they can, they can't hide it from you, there's nothing to worry about, they're not gonna
178 00:28:21,179 --> 00:28:32,069 be able to hide in the future, because you now know how to do it. It's just data. While Larry Williams back in the 70s and 60s, he had it figured out then,
179 00:28:32,399 --> 00:28:42,719 but only at extremes. And that's what I'm gonna say in closing here. When we look at the commitment of traders report, and we plot it on traders basis,
180 00:28:42,719 --> 00:28:50,459 whether it's a net long net short on commercials, if we get to a four year extreme or two year extreme or 12 month extreme, generally, there's usually a
181 00:28:50,459 --> 00:29:00,719 long term trend reversal at play. And the commercials will sometimes factor that in with their own movements in the marketplace. By having those extremes, we
182 00:29:00,719 --> 00:29:10,169 will discount any short term hedging program. If we get to a four year, two year or one year extreme of the highest high and the lowest low their net positions.
183 00:29:11,549 --> 00:29:18,479 But let's look at this segment here again, a little bit closer where the commercials were below the zero line. And this section over here where they're
184 00:29:18,479 --> 00:29:26,699 above the zero line when we see those conditions, okay, the red line that's a sell program, the red shaded area when it's like that below the zero line that
185 00:29:26,699 --> 00:29:34,499 is a sell program doesn't mean you can't see buying going on but you have to look at in form of the hedging program that goes on. Look for the small short
186 00:29:34,499 --> 00:29:41,759 term ranges and when they go above the new range that you would define as we just mentioned, an outline a moment ago. You can see where their buying and
187 00:29:41,759 --> 00:29:52,019 selling is taking place. Below the zero line the best conditions are looking for shorts. That means if you can get institutional overflow bearish, you want to
188 00:29:52,019 --> 00:30:01,199 look for net short positions about the commercials and at premium rates and that would be the ideal scenario, but you can still get by it hedging programs inside
189 00:30:01,199 --> 00:30:09,479 that long term sell program. And again, I know this is going to confuse some of you. But you're gonna have to watch this video several different times, because
190 00:30:09,479 --> 00:30:20,339 you're gonna see, by looking at it multiple times and listening, you'll see that there's two factors taking place here, long term, buy and sell programs based on
191 00:30:20,339 --> 00:30:28,529 the zero line, whether they're above or below it. And then they hedge even during those periods. Because they're not just buying all one time and selling
192 00:30:28,529 --> 00:30:36,899 all on time. They're moving back and forth in the marketplace around specific price levels. When they create these nodules, and the hedging program, those
193 00:30:36,899 --> 00:30:47,099 levels are significant in the future, they're going to be key price points as a PDE array. Make sure you have that in your charts and note them by using the CFT
194 00:30:47,129 --> 00:30:55,649 hedging program technique that has taught you here. And the green shaded area. That is ideally you'd have seen the best buys when the market is creating
195 00:30:55,649 --> 00:31:04,199 discounted rates and institutional overflows bullish, but doesn't mean you can't be selling short, when the short term six month or 12 month range indicates that
196 00:31:04,199 --> 00:31:12,329 the commercials are net short and a new adjusted range. As in other words, we looked at the last highest high and lowest low and last six months and 12
197 00:31:12,329 --> 00:31:21,059 months, even if they're above the zero line. While that's a bullish buy program long term, they could still be dealing short term selling hedging programs in
198 00:31:21,059 --> 00:31:29,129 there, and it causes price to go lower. But you have to look at things in terms of blending three different things you're looking at the program of buying and
199 00:31:29,129 --> 00:31:35,759 selling, whether they're above or below is the airline. Then you look at the hedging program based on the range of the highest high and the lowest low the
200 00:31:35,759 --> 00:31:44,249 commercials in the last six months in last 12 months. And then using institutional order flow what is priced telling you is it respecting discount
201 00:31:44,249 --> 00:31:52,649 rates or premium arrays. And by blending those things, you can get to the truth of what the markets actually doing and you'll know what institution orderflow is
202 00:31:52,679 --> 00:32:03,359 with the greatest of confidence. So commercial hedging hedging programs, you know, if commercials are above or below the net sum zero line, both sides of the
203 00:32:03,359 --> 00:32:13,889 market can be traded. The current range at the commercials net position is referred to if institutional order flow is bullish, we're going to be blending
204 00:32:13,889 --> 00:32:24,599 discount PDAs and the last 12 or six month net long commercial readings for long trades. Now, again, that's when we see those little bullish nodules in new
205 00:32:24,599 --> 00:32:34,679 defined range. Again, this can be ideally seen when we're above the zero line. If institutional order flow was bearish, we're gonna be blending premium PD
206 00:32:34,679 --> 00:32:46,019 arrays and the 12 or six month range of the net short commercial readings for short trades. The best conditions are seen when both net some bases agree with
207 00:32:46,019 --> 00:32:59,219 institutional order flow and pdra Matrix confluences. The long term commercial activity, the net sum zero line delineates the net buying and or net selling.
208 00:32:59,729 --> 00:33:07,649 Now retail traders that know about the net trader says chart only look at whether commercials are net long for bullishness or net short for bearishness on
209 00:33:07,649 --> 00:33:18,269 the market. The smart money can be tracked by focusing on the 12 month and six month range of the commercial net position. If the commercials are above nets,
210 00:33:18,299 --> 00:33:27,149 zero line, we're gonna be focusing on the 12 to six month net long readings. If commercials are below the zero line, we're gonna be focusing on a 12 or six
211 00:33:27,149 --> 00:33:37,259 month range, net short positions. We blend these conditions with pdra matrix and institutional order flow for optimal results in directional analysis. So with
212 00:33:37,259 --> 00:33:46,859 this teaching, what we've done, it's been able to decipher what the commercial actions are, whether they're buying or selling, and not relying so much on
213 00:33:46,859 --> 00:33:56,639 whether they're below or above the zero line as everyone else interprets price using this information. Looking at that 100 level here we can see how price went
214 00:33:56,639 --> 00:33:59,099 back to the 2014
215 00:34:00,509 --> 00:34:12,089 January highs and July highs and cleared out those equal highs and fell short from that position all the way down to a level that was seen as a discount array
216 00:34:12,929 --> 00:34:23,279 in the January 2016 time period. This is a weekly chart. So everything that we teach in terms of PD IRAs, institutional order flow, all those things get
217 00:34:23,279 --> 00:34:33,089 blended together to get optimal results. And now you entered the inner circle as it relates to hedging commercial activity and CBOT. Until next time, I wish you
218 00:34:33,089 --> 00:34:34,259 good luck and good trading