Hello and thanks for joining us at VantageRM.
In order for you to get the most out of this service, please take the time to wade through the information provided below. I will go through some fundamental aspects of what we do, how we do it, and how you should use the information we provide.
Our mission statement is very simple:
To provide a technical component to be used in the marketing programs for producers and/or handlers of major commodities which are used in their daily operations.
I assume the reason you have subscribed to this service is because you either produce or use a commodity which we analyze and follow on a daily basis. While some of you may also be speculators in the Ag sector and are looking for a technical commentary, we really specialize in risk analysis for those who will handle the actual product at some point in the life cycle of the commodity and are at risk to price movement. Before defining "technical component" so that we have a common foundation, let me first ask a question:
Which is better, fundamental analysis or technical analysis?
The answer is neither!!! They both are very important and we do not focus on one to the exclusion of the other.
At VantageRM, you will find that our emailed updates contain plenty of fundamental analysis but in all honesty, you can get that from a multitude of sources who will analyze the supply and demand data the same as we do. We have no competitive advantage in fundamental analysis although we do believe that we do a good job of it.
Our competitive advantage in risk management analysis (now you know what the RM in VantageRM means) is the Technical component we bring to risk management.
Why Technical Trading is So Important
The reason we are so keen on technical trading is that there is a human nature factor that leads us to the technical action as being reliable in risk analysis. For example, assume that you were a rice exporter and knew beyond any doubt that Thailand (the world's largest rice exporter) was going to stop shipping rice for two months starting next week. Assume you had this information and no one else did. What would be the first thing you would do? Obviously it would be to go to the market and buy as much rice as you could as quickly and quietly as possible. After you had it bought, then and only then would you share the information with the rest of the world. This is human nature and it is good business assuming you received the information legally.
This then projects a fundamental truth regarding market information. By the time it is in the written press, it has already shown up in the price action. That doesn't mean it is too late to buy or sell but it does mean the market will have already shown action indicating that something is going on. In other words, technical action occurs before fundamentals change. This is why technical analysis is so important, because many times we can see something happening in the market place that is changing the risk. We may not know the cause, such as an embargo, but we have a good technical "hint" that something is going on in the market that the fundamentals don't explain.
Technical analysis is truly a look at historical action. It says, “when in the past that has happened, many times going forward, this has happened.” For an example of this, look at the following statement:
“In the past when the market has been in an uptrend and reversed lower and at the same time we are in a technical condition of ‘looking to sell’ the market, 75% of the time the market has gone down.”
Technical signals and analysis are entirely based on historical evidence and when you see multiple technical systems starting to say the same thing, then it is significant and the market will normally follow what it has done historically.
This is why we specialize in technical analysis.
Is it always right? Of course not, but it can put the odds in your favor. With that said, let's look at technical analysis and how Progressive Futures talks about it in risk analysis. There are two major parts to technical analysis and we will refer to them as Charts and Indicators.
Charts
"Charts" refers to the common charting techniques that accompany Bar Charts and Candle Stick Charting. These techniques have been around for decades and we have studied them for many years. We look at them on a daily and sometimes hourly basis to determine if there is a reoccurring pattern which we can identify thereby giving us advanced notice of a possible change in price risk. Included in the Charts area of analysis are trends lines, gaps, bar formations, etc.
Indicators
The second part of technical analysis we will refer to as "Indicators." These are mathematical calculations based on the prices themselves and have nothing to do with what the "Charts" show. Examples would be a Moving Average, Bollinger Bands, Direction Movement Indicator and then several others we actually developed and are proprietary in nature. (We can’t give away all of our secrets.)
Sometimes the Chart patterns will be saying one thing, while the Indicators are saying another. It is not a science, it is an art, and as such the idea of technical trading is again, only to put the odds in our favor based on what they have done historically. In any event, in our emailed updates we will talk about Charts and Indicators so make sure you understand the difference. It will become very clear the more you view the daily videos.
Technically Based Fundamentals
Another area we will comment on is not connected to price action. This information is what I like to refer to as technically based fundamentals. This would include analysis of the Commitment of Traders reports which is "Open Interest" analysis and also volume numbers on a daily, if not hourly basis. Crop condition reports will also be analyzed to see if there is any indication of a possible change in supply expectations coming.
Comments will be for Both Sides of the Market
Remember that VantageRM has clients on both sides of the market and what is major risk for one side is a pricing advantage for the other but is still risk. So for example, if you farm corn understand that we also help with risk analysis for a corn buyer such as a cattle feed yard. In this regard we may be talking about buying corn when you are only interested in selling. In those cases you should ignore the comments as they are meant for the other side of market. For your information, we have large market participants on both sides of the natural gas and crude based energy markets as well so we will cover both sides in those markets too.
Our Approach
We compile the technical aspects of all the Charts and Indicators for the markets we cover and the result is a Risk Assessment of each market. One of our main tools you will see is the Del-Model which gives us buy and sell zones. These zones do not change from day to day and so we show them usually once a week, but the idea is to tell traders if it is safe to buy or sell based on overall technicals. You might use that model as a confirmation of your own ideas.
The Del-Model is proprietary but in general takes the current price of a commodity and puts it in perspective and relationship to that commodities price range over a specific time. It could be called a “momentum” indicator as it shows the internal momentum built up in the market. So then if the Del Model is in the “look to buy” zone which means the indicator has a value under 20%, it first says that the price is probably making new lows compared to where it has been over the recent time frame so the momentum is to the downside. At the same time, we also know that history says significant lows are made when the price has been under that 20% level so we begin looking for other indicators and chart patterns that could signal a possible change in the bearish direction and thus the risk.
As for other indicators that would give us the signal of a change, we have a trend indicator, a momentum indicator and contrarian mathematical percent bullish indicator. All of these will be used and they will make sense to you the more you see them in action in our daily videos. We also have our proprietary systems which we comment on every once in a while.
One final aspect to watch in our general comments is what we call support and resistance levels. We will give out specific price levels of support and resistance which are not just our perceived levels but also those mentioned by the whole trade which makes them significant. Violations of those levels can indicate a change in risk.
In Summary
I strongly recommend that you use this service as part of an overall marketing program and realize our mission is to provide you with the best market information from a technical basis that we can. Yes, we make recommendations by telling you what we are doing in the market, but your knowledge of your business, your risk and your market environment is better than ours. Look at us as a partner with you in your marketing program.
Thanks again for giving us a try and feel free to ask questions on any aspect of our analysis at any time.
Dennis DeLaughter
Market Analyst
In order for you to get the most out of this service, please take the time to wade through the information provided below. I will go through some fundamental aspects of what we do, how we do it, and how you should use the information we provide.
Our mission statement is very simple:
To provide a technical component to be used in the marketing programs for producers and/or handlers of major commodities which are used in their daily operations.
I assume the reason you have subscribed to this service is because you either produce or use a commodity which we analyze and follow on a daily basis. While some of you may also be speculators in the Ag sector and are looking for a technical commentary, we really specialize in risk analysis for those who will handle the actual product at some point in the life cycle of the commodity and are at risk to price movement. Before defining "technical component" so that we have a common foundation, let me first ask a question:
Which is better, fundamental analysis or technical analysis?
The answer is neither!!! They both are very important and we do not focus on one to the exclusion of the other.
At VantageRM, you will find that our emailed updates contain plenty of fundamental analysis but in all honesty, you can get that from a multitude of sources who will analyze the supply and demand data the same as we do. We have no competitive advantage in fundamental analysis although we do believe that we do a good job of it.
Our competitive advantage in risk management analysis (now you know what the RM in VantageRM means) is the Technical component we bring to risk management.
Why Technical Trading is So Important
The reason we are so keen on technical trading is that there is a human nature factor that leads us to the technical action as being reliable in risk analysis. For example, assume that you were a rice exporter and knew beyond any doubt that Thailand (the world's largest rice exporter) was going to stop shipping rice for two months starting next week. Assume you had this information and no one else did. What would be the first thing you would do? Obviously it would be to go to the market and buy as much rice as you could as quickly and quietly as possible. After you had it bought, then and only then would you share the information with the rest of the world. This is human nature and it is good business assuming you received the information legally.
This then projects a fundamental truth regarding market information. By the time it is in the written press, it has already shown up in the price action. That doesn't mean it is too late to buy or sell but it does mean the market will have already shown action indicating that something is going on. In other words, technical action occurs before fundamentals change. This is why technical analysis is so important, because many times we can see something happening in the market place that is changing the risk. We may not know the cause, such as an embargo, but we have a good technical "hint" that something is going on in the market that the fundamentals don't explain.
Technical analysis is truly a look at historical action. It says, “when in the past that has happened, many times going forward, this has happened.” For an example of this, look at the following statement:
“In the past when the market has been in an uptrend and reversed lower and at the same time we are in a technical condition of ‘looking to sell’ the market, 75% of the time the market has gone down.”
Technical signals and analysis are entirely based on historical evidence and when you see multiple technical systems starting to say the same thing, then it is significant and the market will normally follow what it has done historically.
This is why we specialize in technical analysis.
Is it always right? Of course not, but it can put the odds in your favor. With that said, let's look at technical analysis and how Progressive Futures talks about it in risk analysis. There are two major parts to technical analysis and we will refer to them as Charts and Indicators.
Charts
"Charts" refers to the common charting techniques that accompany Bar Charts and Candle Stick Charting. These techniques have been around for decades and we have studied them for many years. We look at them on a daily and sometimes hourly basis to determine if there is a reoccurring pattern which we can identify thereby giving us advanced notice of a possible change in price risk. Included in the Charts area of analysis are trends lines, gaps, bar formations, etc.
Indicators
The second part of technical analysis we will refer to as "Indicators." These are mathematical calculations based on the prices themselves and have nothing to do with what the "Charts" show. Examples would be a Moving Average, Bollinger Bands, Direction Movement Indicator and then several others we actually developed and are proprietary in nature. (We can’t give away all of our secrets.)
Sometimes the Chart patterns will be saying one thing, while the Indicators are saying another. It is not a science, it is an art, and as such the idea of technical trading is again, only to put the odds in our favor based on what they have done historically. In any event, in our emailed updates we will talk about Charts and Indicators so make sure you understand the difference. It will become very clear the more you view the daily videos.
Technically Based Fundamentals
Another area we will comment on is not connected to price action. This information is what I like to refer to as technically based fundamentals. This would include analysis of the Commitment of Traders reports which is "Open Interest" analysis and also volume numbers on a daily, if not hourly basis. Crop condition reports will also be analyzed to see if there is any indication of a possible change in supply expectations coming.
Comments will be for Both Sides of the Market
Remember that VantageRM has clients on both sides of the market and what is major risk for one side is a pricing advantage for the other but is still risk. So for example, if you farm corn understand that we also help with risk analysis for a corn buyer such as a cattle feed yard. In this regard we may be talking about buying corn when you are only interested in selling. In those cases you should ignore the comments as they are meant for the other side of market. For your information, we have large market participants on both sides of the natural gas and crude based energy markets as well so we will cover both sides in those markets too.
Our Approach
We compile the technical aspects of all the Charts and Indicators for the markets we cover and the result is a Risk Assessment of each market. One of our main tools you will see is the Del-Model which gives us buy and sell zones. These zones do not change from day to day and so we show them usually once a week, but the idea is to tell traders if it is safe to buy or sell based on overall technicals. You might use that model as a confirmation of your own ideas.
The Del-Model is proprietary but in general takes the current price of a commodity and puts it in perspective and relationship to that commodities price range over a specific time. It could be called a “momentum” indicator as it shows the internal momentum built up in the market. So then if the Del Model is in the “look to buy” zone which means the indicator has a value under 20%, it first says that the price is probably making new lows compared to where it has been over the recent time frame so the momentum is to the downside. At the same time, we also know that history says significant lows are made when the price has been under that 20% level so we begin looking for other indicators and chart patterns that could signal a possible change in the bearish direction and thus the risk.
As for other indicators that would give us the signal of a change, we have a trend indicator, a momentum indicator and contrarian mathematical percent bullish indicator. All of these will be used and they will make sense to you the more you see them in action in our daily videos. We also have our proprietary systems which we comment on every once in a while.
One final aspect to watch in our general comments is what we call support and resistance levels. We will give out specific price levels of support and resistance which are not just our perceived levels but also those mentioned by the whole trade which makes them significant. Violations of those levels can indicate a change in risk.
In Summary
I strongly recommend that you use this service as part of an overall marketing program and realize our mission is to provide you with the best market information from a technical basis that we can. Yes, we make recommendations by telling you what we are doing in the market, but your knowledge of your business, your risk and your market environment is better than ours. Look at us as a partner with you in your marketing program.
Thanks again for giving us a try and feel free to ask questions on any aspect of our analysis at any time.
Dennis DeLaughter
Market Analyst