Introduction

The speaker introduces the topic of commodities and explains that everything discussed is for informational purposes only.

What are Mega Trades?

The speaker defines Mega Trades as large price swings or trends that can produce massive potential gains. These moves have huge institutional sponsorship and are coupled with strong influences from actual supply and demand factors that fuel these moves.

• Mega trades are easy to spot historically in price charts.

• Supply and demand as it relates to Commodities is an absolute reality.

• To be successful, you need a good feel for what the supply and demand factors are for a commodity.

• It's best to avoid being a specialist or one market trader when following the commodity markets.

Agricultural Markets

The speaker discusses agricultural markets, which include markets that feed the world. He explains how droughts, insect damage, frost, or bumper crops will have an enormous effect on prices in these markets.

Grain Markets

The speaker takes a look at the grain complex and provides a personal list of grains to consider.

• Personal list includes soybeans, soybean meal, soybean oil (both meal and oil are derivatives of the soybean itself), wheat, corn, oats (thin market), canola, and rice (thin market).

• Oats and rice should not be followed due to their thin market nature.

• Thin markets can be used to look for drops in open interest to build an idea about whether grain markets as a whole would go higher or lower based on that.

Agricultural and Financial Markets

In this section, the speaker discusses the different markets in agriculture and finance.

Agricultural Markets

• There are three grains in the agricultural sector - wheat, soybean, and corn.

• The livestock meat complex includes live cattle, feeder cattle, and lean hogs. Pork bellies used to be included but they have been discontinued.

• The softs market includes coffee, cocoa, sugar, and orange juice. Cotton is also included in the fibers market.

Financial Markets

• The financial markets are hard in nature and industrious. Industrial supply and demand factors move these commodities.

• The metals market is broken into two categories - precious metals (gold, silver, palladium, platinum) and industrial metal (high-grade copper).

• The energy sector includes crude oil, heating oil, gasoline futures, and natural gas futures.

Fundamentals of Commodities Trading

In this section, the speaker talks about how fundamentals matter for commodity trading.

• Commodities require a measure of fundamental consideration in analysis.

• A simple newspaper headline might be all that's needed to draw a fundamental conclusion.

• Extreme bullish or bearish sentiment can be wonderful contrarian signals for Mega trades to form.

Introduction

In this section, the speaker introduces the concept of finding Mega trades in commodity markets. He explains that a quick and easy first step is to consult the delivery month closing prices and look for any commodity that has a premium over a distant month.

Finding Premiums

• Look at delivery contract months and note any commodity that has a premium over a distant month.

• This will be our primary search every year as it is the common ingredient for explosive bull markets.

• Bull markets tend to have longer periods of going up in explosive price action when there's a premium.

• We're looking for conditions when the market is predisposed to go higher.

Bullish Commodities

• A bullish commodity does not require a premium but merely adds to the likelihood of a strong price rally.

• Commercial bull markets are parabolic vertical moves that cover ground quickly.

• Carrying chargeable Markets take many months to come to fruition or complete.

Dollar Based Analysis

In this section, the speaker discusses how generally, when the US dollar declines, it allows commodity prices to rise. However, there can be periods lasting as long as a year when commodity prices and the US dollar move in tandem or in the same direction.

US Dollar Impact on Commodity Prices

• Generally, when the US dollar declines, it allows commodity prices to rise.

• Conversely, when the US dollar rises, precious commodity prices lower.

• There can be periods lasting as long as a year when commodity prices and the US dollar move in tandem or in the same direction.

Understanding the Grain Complex

In this section, the speaker discusses how to anticipate higher prices in commodities by looking at the grain complex. He explains that when the dollar index is going lower, it gives a reason to anticipate higher prices in commodities.

Characteristics of Strongest Commodity Markets

• When smart money is buying or selling, they leave telltale signs in price.

• The strongest commodity markets can be found by looking for characteristics that lead to finding the strongest of the specific commodity markets in a specific sector.

• Wheat was unwilling to make a lower low while soybean market had fallen off rather precipitously. This indicates that wheat is stronger than soybean and as a result, wheat market rallied 6,500 per contract and soybean market rallied 4,800 per contract.

• As an analyst and developing professional trader, we want to see the characteristics that lead us to find the strongest of the specific commodity markets in a specific sector.

Visual Analysis

• There is a built-in advantage to using visual analysis like this because it cuts to the core of whether smart money is buying or selling.

• If there's going to be institutions stepping in or large commercial dominant users or producers trying to buy or sell a lot of a specific commodity, they're going to leave telltale signs in price.

• Our job as an analyst and developing professional trader is to find the strongest or weakest at that given time and build up our portfolio accordingly.

Commodities Rallying

• When looking for commodities rallying as a whole while dollar index ideally should be going lower or about to trade lower, it gives us a reason to anticipate higher prices in commodities.

• Under the pretense that dollar may go higher, we're going to be looking for characteristics to support the idea that the three markets should go higher.

• Wheat was unwilling to make a lower low while soybean market had fallen off rather precipitously. This indicates that wheat is stronger than soybean and as a result, wheat market rallied 6,500 per contract and soybean market rallied 4,800 per contract.

Introduction to Commodity Trading

In this section, the speaker introduces the concept of commodity trading and outlines a basic process for identifying potential trades.

The Process of Commodity Trading

• Notice changes in open interest and consolidation periods.

• Look for headlines that could impact commodities.

• Focus on markets with a premium and use the dollar index for direction.

• Use relative strength to identify potential trades.

• Follow one leader from each sector and use option prices for paper trading.

Diversified Approach to Commodity Trading

In this section, the speaker discusses how a diversified approach can increase the odds of capturing a mega trade in one or more sectors.

The Commodity Basket

• Not every sector will perform well, but diversification increases odds of success.

• Compare leaders within sectors to identify which ones have more relative strength.

Identifying Strong Commodities

In this section, the speaker discusses how to identify strong commodities and allocate investment capital accordingly.

Finding Sector Leaders

• Look for commodities that are breaking out above short-term highs or bearish order blocks before other commodities.

• Identify which commodity is seeing much more support at down close candles or bullish order blocks.

• Allocate more of your account or buy more options in the strongest commodities on your leader list.

Allocating Investment Capital

• Don't evenly distribute allocation of money among different leaders.

• Analyze further to find out which of these leaders are even stronger than their respective peers.

• Allocate more investment capital to the strongest of the strong, and use remaining portion with other sectors.

Diversification

• Participate in all commodity sectors but focus heavily on those showing leadership characteristics.

• Allocate a lot more investment capital in those that have been visually shown to show massive accumulation because they're breaking highs and failing to go lower.

• Spread remaining portion among other sectors.

The Treasure Seeker Mindset

In this section, the speaker talks about his mindset when it comes to analyzing markets and finding opportunities.

Looking at Markets as a Treasure Hunt

• The speaker looks at markets as a treasure hunt, where he needs to personally go into charts and find hidden treasures.

• He likens it to hide-and-seek, where smart money is hiding something from him, and he needs to find them by tracking their footprints or casting a line where they might be biting.

• He encourages finding enjoyment in whatever way possible when analyzing markets.

Identifying Big Moves in the Commodity Markets

In this section, the speaker discusses how to identify big moves in the commodity markets and encourages listeners to study 2016's examples.

Homework Assignment

• Study the big movers in the commodity markets in 2016.

• Look for each sector's biggest mover and see if you can find characteristics of professional accumulation or distribution by way of price action.

• Use the dollar index to look for an inverse relationship with currencies that are moving up or down.

• Don't be bored with this exercise as it will get you to another level of understanding about what the market is doing and why.

Live Session

• The speaker purposely avoids giving a lot of examples because there will be a live session where he will give homework to look for specific things.

• The live session will reveal insights on how to go back and look at previous data and old charts to pull up information.

Commodities Market Sectors

• The speaker removed currencies, bond market, indices, and stocks as individual sectors from this lesson.

• Focus on all big moves that took place in 2016 in commodities such as grains (corn, soybean, wheat), meats (live cattle, feeder cattle, lean hogs), coffee, cocoa, sugar, orange juice, cotton, gold and silver.

• A step-by-step procedure will be given in August on how to go through each thing to look at.

Conclusion

The speaker encourages listeners not to be discouraged if they don't come away with anything fruitful from the homework assignment. The live session will break down the information and help with understanding.

Introduction to Big Moves in 2016

In this section, the speaker introduces the topic of big moves that took place in 2016 and mentions a live session coming up to discuss them.

Big Moves in 2016

• The speaker mentions that there were some big moves that took place in 2016.

• These moves will be discussed further in a live session on Friday.