0:09 so can we talk about the commodity
0:10 markets it's very important that you
0:12 read just disclaimers
0:14 everything that's being discussed in
0:16 this segment of our discussion on
0:20 Commodities any trade
0:24 discussion or idea or concept should be
0:26 viewed in the light of a paper trade not
0:28 an actual trade I'm not a CTA so I'm not
0:30 licensed to get trade advice about
0:32 Commodities but I'm sharing ideas on how
0:34 I've looked at the commodity Market over
0:36 the last 20 plus years and where I've
0:38 seen consistency finding directional
0:51 okay all right so we are in the first of
0:55 the June 2017 content ICT mentorship uh
0:57 this is ICT commodity trading lesson one
1:01 commitment of Traders how I use the data
1:04 okay and the first thing we're gonna be
1:06 looking at is the raw data now when we
1:09 look at the commitment Traders report uh
1:11 what is that well the raw data comes by
1:13 way of a weekly report released by The
1:17 cftc and you can find this on
1:20 www.cftc gov
1:21 and what you want to look for is you
1:23 want to be looking at the Futures
1:26 Contract only in the short format and if
1:28 you do this under the CME which is the
1:31 Chicago Mercantile Exchange we can find
1:33 the currencies that trade as Comm dials
1:36 and one of the Comm dials are
1:39 Japanese Yen and this is the most recent
1:41 short format
1:43 commitment of Traders report for the
1:45 Japanese Yen
1:47 as you can see here this is just for the
1:50 Japanese Yen Futures Contract now the
1:52 cftc website gives you the opportunity
1:54 to pull up the options positions as well
1:56 I'm not concerning myself with that I
1:58 never concern myself with that at all I
2:01 look at only the Futures positions and
2:03 you want to be looking in the center
2:06 column here where it says commercial
2:08 and when you see that commercial area
2:10 it's going to give you a little column
2:12 that says long to the left and then
2:13 short to the right directly underneath
2:16 that long column you'll see that there is
2:17 is 143
2:19 143
2:22 450 contracts that's the commercial long positions
2:24 positions
2:26 and then to the right of that underneath
2:31 the short column it's 76 426 contracts short
2:32 short
2:34 the way we get the net position is we
2:36 subtract the two to get the difference
2:38 and if it's a positive number it's net
2:40 long if it's a negative number it's net
2:43 short in this case we have 67 024
2:46 contracts long that by the difference
2:49 between the long positions and the short
2:51 position so there's a a net long
2:54 position of sixty seven thousand twenty
2:56 four contracts long
2:59 now basically this tells us nothing
3:02 about their current hedging program so
3:03 what we have to do is have to look
3:05 deeper and go behind the numbers and see
3:13 okay net Trader's position line chart
3:16 and with this chart we can track the
3:19 three main classes of Traders
3:23 and again you would find this on
3:25 www.barchart.com you see me use it many
3:27 times in the past
3:28 and what you're going to be doing is
3:29 you're going to be plotting a daily
3:32 chart and you'll be including in the
3:34 indicator portion on the bottom of the
3:35 chart you're going to be adding the net
3:38 Trader's position line chart
3:40 and the duration you want to be
3:42 displaying is at least one year's worth
3:46 and the commercial Traders are typically
3:49 on bar chart.com shown as the red line
3:51 at the bottom of the chart
3:53 the large Traders are shown as in a
3:56 green line and the small speculators are
3:59 always shown in as a blue line
4:01 but when we look at this price action
4:03 against the
4:05 net Trader position line chart I want
4:08 you to visually see the hedging programs
4:11 by the commercial Traders now when I
4:13 first got into trading obviously my
4:15 mentor was Larry Williams much like
4:18 everyone else uh that's ever come across
4:20 his material uh he's like The Godfather
4:22 if you will of the cot data
4:24 so everything he mentioned in his 1970
4:26 book how I made a million dollars
4:29 trading Commodities last year using the
4:32 commercial information that was like
4:34 light years ahead of everything else
4:37 naturally everyone you know flocked to
4:38 just looking at whether the commercials
4:41 are knit long or if they're not short
4:43 much like everyone else I found out by
4:46 trial and error that it isn't that easy
4:47 you gotta go in there and do some more
4:51 research I thought clearly by looking at
4:53 the commercials uh if they were buying
4:55 so therefore I had to be a buyer too but
4:57 because their nature
5:00 of what they are as a as a participant
5:03 in the marketplace they are usually
5:07 large corporate producers or users of
5:10 Commodities and you know Commodities
5:12 like a Comm dial is the same thing uh
5:14 currencies are a commodity they're
5:16 they're bought and sold they're provided
5:19 for in terms of allowing Global Commerce
5:23 uh you know providing loans
5:26 making transactions all over the world
5:28 and because there's a difference of all
5:30 these countries around the world there's
5:33 going to be a change from one currency
5:36 to the other to do business or make
5:38 transactions in another country so just
5:40 like we would look at for instance like
5:43 Coco for Hershey where they make a large
5:48 uh production of chocolate you know
5:50 every day their number one you know
5:54 ingredient is sugar and cocoa so if we
5:57 follow those Commodities you naturally
5:59 cocoa is going to have a lot of
6:01 fundamental supply and demand factors
6:03 that go along with it and Hershey's
6:04 going to have a trained accredited staff
6:06 to track all those things to be able to
6:09 you know keep a closer eye on whether
6:11 the price is really cheap or it's
6:12 expensive if they think it's going to be
6:14 expensive in the near future they're
6:15 going to be much more aggressive about
6:17 buying it because they want to lock in
6:18 lower prices because they know at a
6:20 later time prices will go higher the
6:23 same thing occurs with currencies so
6:26 if we look at the net Trader's position
6:28 line chart it gives us a graphic
6:31 depiction of the overall net basis the
6:34 numbers are they above the zero line or
6:36 below this Airline
6:38 by itself it doesn't mean anything but
6:41 when we look at the information a little
6:43 bit closer in a different light you'll
6:45 have a lot better understanding about
6:50 so that brings us to the commercial
6:53 hedging so naturally if we pull up a bar
6:57 chart.com chart of the Japanese Yen and
6:59 you put the net trade Association line
7:01 chart one the chart itself with about
7:03 one year's worth of data this is what
7:04 you get so
7:06 so
7:08 by itself again it means absolutely
7:10 nothing you can see between today's
7:15 present date of June 5th 2017 and
7:19 December of 2016 the commercials the red
7:20 line at the bottom of the chart shows
7:23 that red line above the zero line
7:26 that zero line delineates whether we're
7:29 net longer net short so if that red
7:31 lines above the zero line from December
7:35 2016 to present time June 2017 that
7:37 means that the commercials have been net
7:40 long for over six months so
7:41 so
7:43 what does that mean you buy I'll only
7:45 just buy it doesn't mean you just buy
7:47 there's other things you have to look at
7:49 but by itself it means that they are in
7:52 a buy program okay so there's a buy
7:53 program and then there's hedging
7:57 programs the buy program is a
8:00 macro perspective or macro program where
8:03 they focus the bulk of their buying and
8:05 while they'll hedge and sell some
8:08 they'll be hedging in prices by selling
8:11 the shorter term
8:19 can be seen by looking at the 12 to 6
8:21 month durations in other words we look
8:23 back a year to see what they've done the highest
8:25 highest
8:27 net long position and the lowest net
8:31 long position they've had and the lowest
8:33 net short position and the highest net
8:36 short position they've had so we break
8:38 the market down in two categories what
8:41 was their action above that zero line as
8:43 a whole what was the highest reading in
8:44 the lowest reading while above the zero
8:46 line and what was the highest reading in
8:48 the lowest reading below the zero line
8:50 so there's a buy program when they're
8:51 above the zero line in a Cell program
8:53 when they're below it but there's also
8:55 hedging that goes on Commercial hedging
8:58 programs that we need to be aware of and
9:00 you can track them by using this
9:01 information but you have to look at it
9:03 differently you can't look at it like
9:05 this because this is what retail sees
9:07 obviously retail isn't going to have the
9:09 the true perspective on what price is
9:11 doing from a commercial or institutional
9:13 perspective so what I have to do is
9:15 change your perspective on how we look
9:17 at it so let's take a look at it closer now
9:18 now
9:20 so okay what we're focusing on here is
9:22 the bottom of the chart these three
9:24 lines here again they represent the
9:26 green line is the large speculators big
9:29 large funds or big private traders that
9:31 have a lot of position size small
9:32 speculators with the blue line that's
9:34 usually this uh the public they have no
9:35 idea what's going on and in the
9:38 commodity commercials or large
9:41 speculators in terms of like a
9:43 commercial user or producer of a
9:45 commodity in this case if it's a bank
9:47 okay our lending institution they would
9:49 be in that red line
9:51 so the red line is really what we're
9:52 going to be tracking we're only
9:53 interested in that line we don't care
9:55 what the green line is because it's
9:56 always going to be diametrically opposed
9:59 to the actions or positions of that of
10:01 the red line and the blue line we could
10:02 care less about because that's the
10:05 street money less informed crowd
10:07 so what I've done here is I've removed
10:11 okay by way of paint and you can do this
10:13 if you want to but it's not necessary
10:15 once you understand the procedure or
10:17 process that you go through by looking
10:19 at Price you won't need to do this over
10:21 time you're just your eye will be
10:22 trained to be able to look at this and
10:24 be able to see it on its own and you'll
10:25 know just by looking at a standard
10:27 Trader system chart
10:30 it'll jump off at the quick first glance
10:31 you'll see exactly what's going on
10:34 without having to do all this you know
10:35 acrobatics I'm going to show you with
10:36 removing the lines with paint it's not
10:39 necessary but I'll say this before we go
10:41 into it for those individuals that
10:43 really want to have this data and be
10:45 able to use it like this and see it
10:47 graphically you can start collecting the
10:49 data and you can download historical
10:50 data for all the Commodities that you
10:52 want to track and for those individuals
10:53 that are in here they're only interested
10:56 in the currency markets if you like your
10:58 favorite pairs just download historical
11:02 data about the net trade assessment
11:04 um for that particular currency and for
11:05 instance say it's a Japanese Yen you
11:07 want to be a specialist in you can
11:11 download years worth of data on cot data
11:13 and plot the commercials net long
11:15 positions and net short positions and it
11:16 would look like like this you could plot
11:18 it with Excel something like that
11:20 and I'm certain some of you guys that
11:22 are really uh you know Cracker Jack with
11:24 uh programming for mt4 you could
11:25 probably create an indicator that does
11:28 this you know where it plots the uh net
11:29 Trader's position for the commercials
11:32 only that way you can get a range and
11:33 determine what the highest high and the
11:35 lowest low is in the last six months in
11:37 the last 12 months and be able to get
11:38 that range to Define that like we're
11:40 going to discuss here but without having
11:42 to do all that it's not necessary but if
11:43 you want to do it there's things like
11:46 that you can do but what I do is I
11:48 quickly look at the chart and I see it
11:50 as I'm going to outline it here so
11:51 obviously we have about a Year's worth
11:53 of data here and you can see the red
11:55 line is the commercial activity and
11:57 right in December uh rated before
11:59 actually December right like the last
12:01 week of November you can see they swung
12:03 from net short position below the zero
12:07 basis line to net long in the last week
12:10 or so of November 2016 then they've
12:13 remained above the zero line from that
12:15 point on to now
12:17 so again by itself it doesn't tell us
12:19 anything and this is the reason why
12:21 people walk away from cot data they say
12:24 it's useless it's always hindsight it
12:26 can't be used in you know in terms of
12:28 being able to have prognostication about
12:29 what price is going to do and we're
12:31 going to dispel that disbelief in this
12:32 teaching here so what we're going to do
12:35 is we're going to focus on when the
12:37 Market's below the zero line okay so
12:41 zero line basis below zero is when the
12:44 net position is bearish or short the
12:47 position above the zero line okay or the
12:49 Net Zero Sum basis is going to be
12:52 bullish okay or they're net long
12:54 when we have those conditions there's
12:55 going to be things that we can do to
12:58 look for optimal optimal trade entries
13:00 okay not the optimal trade entry pattern
13:01 but for optimal trade conditions for entries
13:03 entries
13:04 so we're going to look at this price
13:06 action segment here and I want you to
13:08 follow along with me okay we're going to
13:09 look in this whole portion of price
13:11 action a lot closer and use this
13:13 information just like we see it here on
13:15 this chart we're going to change it
13:17 slightly in terms of the perspective but
13:19 wait we're not manipulating the data at
13:22 all we're just really zooming in and
13:24 looking at it from a hedging perspective
13:25 because there's a hedging program that I
13:27 want you to see in price action that you
13:29 can track with this net
13:32 some zero line and whether the
13:33 commercials are net longer and that
13:35 short and the activity of their net positions
13:42 okay so this is January 2016 all the way
13:45 to January
13:48 2017 okay and what we're going to do is
13:50 we're going to take this entire price
13:52 action and we're going to divide it in
13:54 two segments we're going to do the first
13:59 portion up to January of 2017. we're
14:01 going to start around
14:05 um well beginning of the year 2016 I'm
14:07 going to break that down but before we
14:08 get into it I want you to look at what
14:11 price was doing the whole first half of 2016.
14:14 2016.
14:15 if you were looking at that and
14:16 obviously we had the benefit of
14:18 hindsight here but for the sake of argument
14:19 argument
14:22 looking at institutional order flow
14:25 were the bullish order blocks being
14:28 respected and were up close candles or
14:31 what would be deemed as a bearish order
14:33 block were they being broken in other
14:35 words are we seeing price being
14:38 supported by discount arrays
14:40 clearly beyond the shadow of a doubt
14:42 it's there so we know the institutional
14:45 order flow was bullish from January 2016
14:48 or February 2016 when price made that low
14:48 low
14:51 and all the way through
14:55 until around the mid-july going into the
14:58 summer months there was a small little
15:01 pullback that broke a short-term low and
15:04 then price resumed higher again and it
15:06 had a lot of issues with getting above
15:10 the 1.00 level on the Japanese Yen which
15:11 we'll look at at the end of this
15:13 teaching why it struggled with that
15:16 level and finally reversed but we can
15:17 see how institutional order flow was
15:20 bullish every time a short-term low was
15:22 taken out price rallied any time a price
15:24 trade down into a down closed candle it
15:26 was supported as a bull shoulder block
15:29 and all of the premium PD arrays were
15:31 always broken through there was no
15:35 premium effect that was lasting
15:38 but if we look at just the cot data down
15:40 here the commercials the red line that
15:42 was below the zero line so that would be
15:45 telling us to do what go short based on
15:47 the traditional perspective of
15:49 commitment Traders and this is why
15:52 everyone discounted Larry Williams stuff
15:55 for a long long time and still do today
15:58 and if you look at how I'm going to show
16:00 you how to use this information it takes
16:04 cot data to light years ahead where
16:05 everyone else doesn't even see it like
16:07 this they don't even turn they don't
16:08 interpret price like this they don't
16:10 interpret CO2 data like this but this is
16:12 exactly how you track what their hedging
16:15 programs are so while they had a cell program
16:16 program
16:19 because they're below the zero line or
16:21 the zero line basis was bearish because
16:24 they were below zero line from January
16:29 February 2016 all the way to the last or
16:31 middle week of November 2016. you can
16:33 see that graphically with the red line
16:35 going above the zero so while they have a
16:37 a
16:41 bearish or sell program going on at the
16:44 time for many months they were selling
16:46 heavily okay as the market was rallying
16:50 they were keeping cell program active
16:52 but you can still see institutional
16:53 order flow being bullish now this is
16:55 what's going to confuse some of you okay
16:56 we're going to cover the details later
16:58 in this teaching but for now what you're
17:00 focusing on primarily is was the
17:02 institutional order flow telling you
17:04 it's going to tell you whether there's
17:06 buying or selling going on by Price
17:08 action alone
17:10 what we're going to do is decipher that
17:13 from a cot standpoint okay and add that
17:16 filter process even though that the cot
17:18 data is below the zero line
17:21 for many months okay we can still fare
17:24 it out when the commercials step in and
17:27 do aggressive hedging and buying even
17:29 though they're in that below zero line
17:31 or a cell program you can see when they
17:33 get aggressive and buy
17:36 and cause price to go higher while still
17:38 keeping the cot data below the zero line
17:41 so anyone tracking the commit
17:42 administrators report for the Japanese
17:45 Yen they're not following along
17:47 in other words it doesn't look germane
17:49 to them it's completely alien it doesn't
17:51 make any sense the Japanese friends
17:53 rallying rallying rallying but they're
17:54 holding a net short position by the
17:56 commercials how can that be why is that
17:59 happening well the commercials
18:01 again they could be Banks they could be
18:03 selling uh currency you know providing
18:05 liquidity all that's being reflected in
18:08 these numbers as a net basis so just
18:10 because they're below the zero line
18:12 doesn't mean that we can't see buying
18:14 and sell as well because it can happen
18:17 on both sides of the marketplace
18:20 but anything above the zero line that's
18:25 and we would have to consider anything
18:28 below the zero line bearish but we do
18:31 not limit ourselves to just focusing on
18:33 selling only below the zero line or
18:34 buying above the zero line because you
18:36 can do both the way you decipher it is
18:38 what is institutional order flow at the
18:39 time what are the conditions right now
18:42 suggesting in price action if bullish
18:43 order blocks are being supporting price
18:46 any lows that are being taken out reject
18:48 price as a stop run on sell stops and
18:50 then all of a sudden it rallies and
18:51 breaks through will be otherwise deemed
18:54 as a premium array then institutional
18:57 order flow is bullish and you can see
18:59 buy programs kick in
19:03 in a hedging program while a larger cell
19:05 program is underway now again let me
19:07 rephrase that
19:10 a larger long-term cell program can
19:14 still have bullish hedging buy programs
19:15 in it
19:17 and you'll see that now as we go through
19:19 this segment of price action for the
19:22 Japanese Yen
19:23 okay so what I have here is I have price
19:28 trained in on that segment of price and
19:29 I removed the
19:31 large speculators line and the small
19:33 speculator's line
19:35 so that way we can highlight
19:38 all of the price action by way of the
19:40 net Trader's position line chart on the
19:42 commercials which is the red line here
19:45 now I want you to see how price stayed
19:47 higher going higher making higher highs
19:50 and and finding support at both shoulder
19:52 blocks running out short-term lows and
19:54 then rallying but finding their way
19:59 through any high or premium array so the
20:01 institutional order flow all the way
20:03 through to the middle of August going
20:06 into September was bullish
20:08 but how do we reconcile this net short
20:10 position by the commercials because
20:12 they're below the zero line it doesn't
20:14 make any sense unless we break it down
20:17 and use the six month range and the 12
20:19 month range idea of looking for the
20:21 highest and the lowest reading on their
20:23 net position by the commercials we don't
20:26 care about what those long-term uh
20:28 speculators that uh you know are in the
20:29 blue line we don't care about the small
20:31 specs we don't care about the large
20:33 specs we're only caring about what the
20:35 actions of this red line is because it's
20:36 going to show us and reflect what their
20:39 hedging program is at the current time
20:41 so anytime when you're looking at cot
20:43 data you want to look at where we're at
20:45 right now and go back six months because
20:46 there's your six month hedging program
20:49 they have a 12-month hedging program so
20:51 by blending the two you can get
20:53 short-term quarterly effect trades now
20:55 think we talked about that there's
20:56 quarterly effects every three or four
20:58 months there's a shift in Market
21:01 structure and the market trades in a
21:02 sustained move
21:04 for about two and a half months or so
21:07 maybe three months but every quarter or
21:09 so of the year there's a shift in market
21:12 structuring and this helps you find that
21:14 by looking at the six month range of the
21:15 highest high and lowest low the
21:19 commercial net position has been
21:21 that is seen with this shaded area so
21:23 you can see the highest high and the
21:25 lowest low is being basically blocked
21:27 out with that shaded area so once you
21:28 know what that is you divide that in
21:31 half you get that range so we can go
21:34 back 12 months and in six months
21:37 intervals but in here you can see how
21:39 the net positions have stayed in a very
21:43 tight range even that can tell us a gold
21:45 mine worth of information
21:47 look what suddenly happens when you
21:49 decipher the information like this you
21:51 do not see CO2 data like this and Larry
21:53 Williams doesn't even do this with CO2
21:55 data this is something I looked at Price
21:58 forever and I knew there was something
22:00 going on behind the scenes and I
22:03 literally said you know what if
22:06 price can trade in trading ranges
22:09 so can this information but if they're
22:11 going to be doing buying and selling it
22:14 can't be hidden if that's true I should
22:18 see it if I look at the data in terms of
22:21 the range or time remember ipta well I
22:24 applied similar things to this so I
22:25 looked at six month intervals and 12
22:28 month intervals three month intervals
22:31 four four months sorry four year
22:33 intervals three year intervals two year
22:35 intervals one year interval and then six
22:37 month intervals
22:39 so if you go back through the data and
22:41 you look at it like that you'll get a
22:43 clear depiction of what the commercials
22:44 are actually doing
22:46 now if you look at these green little
22:49 nodules in here okay even though that
22:51 we're below the zero line by determining
22:53 the total range in the last six months
22:56 in the last 12 months we can get every
22:58 time their hedging program kicks in even
23:00 though there's a larger cell program is
23:02 underway by keeping the net positions
23:03 below zero
23:06 their hedging program can be deciphered
23:07 by looking at these little nodules once
23:09 you determine the range
23:12 the first one here you can see how all
23:13 that bind took place
23:15 the second one here you see where they
23:17 made a low there it bought off of a
23:19 bullish order block that was seen in the
23:23 last week of April filling in a void
23:25 and we had this area here where they
23:26 were buying again after we've taken out
23:29 a short-term low it was seen in the last
23:31 week of June and price resumed but then
23:34 found long-term resistance at that 1.00
23:35 level which we'll look at at the last
23:37 slide of this presentation and you'll
23:39 see why clearly that had a struggling
23:40 point there and we're finally reversed
23:43 by breaking a short term low only after
23:47 trading at that 1.00 level a few times
23:48 failing to get above it and finally
23:51 breaking Market structure to a downside
23:53 and then you can see the commercials
23:57 finally started building up a larger net
23:59 long position above the zero line so
24:01 there's zero line basis is now bullish
24:03 so now they're in a buy program but
24:05 they're going to be hedging early they
24:08 start doing it early but they make the
24:09 highs and the lows in the markets by
24:14 so now we're going to look at the last
24:18 week or so of November 2016 all the way
24:19 to present time
24:21 and again I'm going to counsel you to
24:23 look at what the cot data looks like by
24:25 plotting a
24:28 net traded physician line chart as
24:29 everyone else would do with this with
24:31 the information that you would get with
24:33 uh commitment trades reports
24:35 this is what it would look like if you
24:37 zoomed in on a daily chart again it
24:38 doesn't tell you much except for it
24:40 isn't that long and granted they have
24:42 been sending the Japanese Yen higher as
24:44 a result of that but what was
24:46 institutional order flow as well
24:48 our down candle supporting price when it
24:50 trades back down to it our up close
24:53 candles being broken as PD arrays our
24:56 old highs being taken out and are we
24:58 seeing support by Price moving down into
25:00 what would be otherwise a discount array
25:02 yes we're seeing that all throughout
25:05 this entire price segment from the
25:09 midpoint of January I'm sorry the
25:10 midpoint of December
25:12 going into the January where we made
25:14 that turning point now commercials have
25:16 really moved to a net long position now
25:19 they're in a buy program but now because
25:20 we're in a buy program does that mean it
25:22 can't sell off no it can have sell-offs
25:24 but we're going to focus primarily on
25:27 what is the range the last six months
25:30 okay of the commercial activity but
25:31 first we got to focus on what that looks
25:34 like so we're going to take everything
25:36 down to just the commercial line and I
25:38 removed the small specs line and the
25:40 large speculators did not manipulate the
25:42 price or do anything with the indicator
25:44 all I did was erase everything with
25:45 paint so that way we can clearly see
25:47 what's going on
25:49 I want you to look at by taking that
25:51 information determine the highest high
25:54 and the lowest low in the range defining
25:56 that basis line creating its own new
25:59 basis line we can see where the buying
26:02 kicks in and you see nodules kicking in
26:05 in January we can see one in mid-march
26:07 and we can see one in the last week of
26:09 May and those are the respective time
26:11 periods where the market sees the
26:13 greatest in advances in price going higher
26:19 all through here Market was bullish
26:21 all through here we're currently bullish
26:23 as well if you look at the price of
26:25 Japanese Yen right now and go to the
26:28 left in the last week of April this year
26:29 you can see there's a fair value Gap up
26:32 there at 91.50 so it kind of gives you
26:34 an insight about where we think based on
26:36 what we're talking about here where a
26:38 Japanese Yen might go at least on the
26:39 short term
26:42 and we're using the hedging program as
26:48 so when we look at commercial hedging
26:50 we're not looking just at whether
26:52 they're not long and that short but that
26:54 does give us the buy or sell program
26:55 that they're operating in but inside
26:57 that buy and sell program
26:59 or buy and sell program I should say
27:01 like that there are hedging programs
27:04 that go on because their nature of their
27:06 speculation in the marketplace is to
27:08 lock in good prices for their
27:12 manufacturing of commodity or a good and
27:14 to do that efficiently they have to make
27:17 sure prices are obtained at very
27:19 discount or
27:21 friendly levels you know you don't want
27:22 to be buying if you're cursing you don't
27:25 be buying cocoa later on when you've
27:26 already seen fundamentals are suggesting
27:27 it's going to be higher six months from
27:29 now or a year from now you're not going
27:30 to be doing all your buying then you're
27:32 going to allocate a lot more money now
27:36 to buy UPS uh stock for that so that way
27:38 when prices go higher you've made a
27:41 better return on your investment and
27:43 keeps cost low and that's the nature of
27:45 hedging so the same thing happens with
27:47 the banks and lending institutions you
27:49 know the value of money is going to be
27:51 fluctuating all the time so they're
27:53 trained accredited staffs that do those
27:54 types of things
27:57 they will invest and buy and sell based
27:59 on those
28:01 Notions that they're supplying demand
28:03 factors that they have an assessment on
28:05 I'm not smart enough to know what they
28:06 are I've never claimed to know that and
28:07 you're never going to know that from me
28:09 because I I don't know it personally but
28:11 I can see what they're doing graphically
28:13 and they can't hide it from me and now
28:16 because I've shared it with you you can
28:18 do the same thing there's nothing that
28:19 they can they can't hide it from you
28:21 there's nothing to worry about they're
28:22 not going to be able to hide in the
28:23 future because you now know how to do it
28:26 it's just the data
28:28 while Larry Williams back in the 70s and
28:31 60s you know he had
28:33 figured out then but only at extremes
28:35 and that's what I'm going to say in in
28:37 closing here when we look at the
28:39 commitment of Traders report
28:42 and we applied on uh Traders
28:43 uh basis whether it's a net longer net
28:46 short on the commercials if we get to a
28:48 four-year extreme or a two-year extreme
28:50 or a 12-month extreme generally there's
28:52 usually a long-term Trend reversal at
28:53 play and the commercials will sometimes
28:56 factor that in with their own
28:58 movements in the marketplace
29:01 by having those extremes we will
29:02 discount any short-term hedging program
29:06 if we get to a four-year two-year or one
29:08 year extreme of the highest high and the
29:11 lowest low of their net positions
29:12 but let's look at this segment here
29:14 again a little bit closer where the
29:16 commercials were below the zero line
29:18 and this section over here where they're
29:20 above the zero line when we see those
29:23 conditions okay the red line that's a
29:24 cell program the red shaded area when
29:26 it's like that below the zero line that
29:28 is a cell program doesn't mean you can't
29:30 see buying going on but you have to look
29:32 at in the form of the hedging program
29:34 that goes on look for the small
29:36 short-term ranges and when they go above
29:37 the new range that you would Define as
29:39 we just mentioned in outline a moment
29:41 ago you can see where they're buying and
29:43 selling is taking place
29:46 below the zero line the best conditions are
29:47 are
29:49 looking for shorts that means if you can
29:51 get institutional order flow bearish you
29:53 want to look for net short positions by
29:56 the commercials and at premium erase and
29:58 that would be the ideal scenario but you
30:01 can still get by hedging programs inside
30:04 that long-term Soul program and again I
30:06 know this is going to confuse some of
30:07 you but you're gonna have to watch this
30:09 video several different times because
30:10 you're going to see
30:13 by looking at it multiple times and
30:16 listening you'll see that there's two
30:18 factors taking place here long-term buy
30:21 and sell programs based on the Zero line
30:23 whether above or below it and then they
30:26 hedge even during those periods because
30:28 they're not just buying all one time and
30:29 selling all one time they're moving back
30:31 and forth in the marketplace around
30:33 specific price levels when they create
30:35 these nodules in the hedging program
30:38 those levels are significant in the
30:41 future they're going to be key price
30:43 points as a PD array
30:45 make sure you have that in your charts
30:47 and note them by using the cot hedging
30:49 program technique that I just taught you
30:51 here in the green shaded area that is
30:53 ideally going to be seeing the best buys
30:55 when the market is creating discount
30:57 arrays and institutional overflows
30:59 bullish but it doesn't mean you can't be
31:02 selling short when the short term six
31:04 month or 12 month range indicates that
31:06 the commercials are net short in the new
31:09 adjusted range as in other words we
31:10 looked at the last highest high and
31:12 lowest low in the last six months and 12
31:13 months even if they're above the zero
31:16 line while that's a bullish buy program
31:18 long term they could still be doing
31:21 short term selling hedging programs in
31:23 there and it causes price to go lower
31:24 but you have to look at things in terms
31:26 of blending three different things
31:29 you're looking at the program of buying
31:30 and selling whether they're above or
31:32 below zero line then you look at the
31:34 hedging program based on the range of
31:36 the highest high and lowest lows of
31:37 commercials in the last six months in
31:40 the last 12 months and then using
31:41 institutional order flow what is price
31:44 telling you is it respecting discount
31:47 arrays or premium arrays
31:49 and by blending those things you can get
31:50 to the truth of what the Market's
31:51 actually doing and you'll know what
31:53 institutional order flow is with the
31:59 so commercial hedging programs you know
32:01 if commercials are above or below the
32:03 net sum zero line both sides of the
32:05 market can be traded
32:07 the current range of the commercial's
32:12 if institutional order flow is bullish
32:14 we're going to be blending discount PD
32:17 arrays and the last 12 or 6 month net
32:20 long commercial readings for long trades
32:22 now again that's when we see those
32:24 little bullish nodules in the new
32:27 defined range again this can be ideally
32:31 seen when we're above the zero line
32:33 if institution order flow is bearish
32:34 we're gonna be blending premium PD
32:37 arrays in the 12 or 6 month range of the
32:39 net short commercial readings for short trades
32:42 trades
32:43 the best conditions are seen when both
32:46 net sum basis agree with institutional
32:48 order flow and PDA rate Matrix confluences
32:55 the long-term commercial activity
32:57 the net sum zero line delineates the net
33:00 buying and or net selling now retail
33:02 traders that know about the net Trader
33:03 Association chart only look at whether
33:05 commercials are that long for
33:07 bullishness or net short for bearishness
33:08 on the market
33:10 the smart money can be tracked by
33:13 focusing on the 12 month and six month
33:16 range of the commercial net position
33:18 if the commercials are above Nets zero
33:20 line we're gonna be focusing on the 12
33:23 to 6 month net long readings
33:25 if commercials are below the zero line
33:27 we're gonna be focusing on the 12 or 6
33:30 month range net short positions we blend
33:33 these conditions with pdra Matrix and
33:35 institutional order flow for optimal
33:37 results in directional analysis so with
33:39 this teaching what we've done
33:42 it's we were able to decipher what the
33:44 commercial actions are whether they're
33:46 buying or selling and not relying so
33:48 much on whether they're below or above a
33:50 zero line as everyone else interprets
33:53 price using this information
33:55 looking at that one zero zero level here
33:57 we can see how price went back to the 2014
34:00 2014
34:04 January highs and July highs and cleared
34:06 out those equal highs and fell short
34:09 from that position all the way down to a
34:12 level that was seen as a discount array
34:15 in the January 2016 time period
34:18 this is a weekly chart so everything
34:20 that we teach in terms of PD arrays
34:23 institution order flow all those things
34:25 get Blended together to get optimal
34:27 results and now you've entered the Inner
34:28 Circle as it relates to
34:32 hedging commercial activity and cot
34:33 until next time I wish you good luck and
