In this episode of Tech Talk, Andy and Cody discuss CME cheese, Dec class III and Jan soybeans.
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Future trading involves risk and is not suitable for all investors. Content provided in this for educational purposes and is not a solicitation to buy or sell commodities.
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Hello everybody. Welcome back to another episode of Tech Talk. I am Cody, he is Andy. It is November 5th. Big election day to day.
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Election day.
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Big election day. Get out there and vote.
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Yes. I did go out and vote. You can vote.
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I did, I did. They asked if I wanted, one of those go vote stickers. I took two.
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You said two?
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Yeah, I took two.
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Somebody doesn’t get their go vote sticker courtesy of Cody.
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Should I go out there earlier? Yes, I wanted one. I said yes, ma’am. She turned her at the other side and I took the.
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This is America. I’m taking two. You know what I was thinking about doing, by the way, a thing about writing your name in, you should have. How old is 34? Oh, so that went to work. You’re going to be 35 to be able to do me.
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President four years from now. Just get it for you.
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Okay? So next election, Cody 2028, we’ll start campaigning. I get to get my likes. We got to get like a sticker or something like that. Start with. Yeah, I kept looking, took the stickers. All right. So yeah again let’s do it. This was I’d say this is probably the one that gets talked about the most in our office right now.
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I feel like at least I’ve had a several people reach out to me and ask, you know, did we go and fill this gap? And I mean short answers. Yes. Right. I mean, we.
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Did.
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That much is really true. This is a weekly. So today’s Super Tuesday is it’s Super Tuesday. I don’t think it is super. Is it is it actually Super Tuesday is is just like presidential election Tuesday. I forget the difference.
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Another one the NFL trade deadline today too. So like we have a big day. Today is a big day.
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This huge day then.
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Big day each.
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Day. Packers going to win Super Bowl this year.
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So I hope so. I probably got pneumonia from the game on Sunday but I’m still here I’m.
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Sorry you’re still here. You’re still looking a chance. I feel like we’re assuming we close here this week, right? Which is still a big F. I mean, it was only two days in, but this has filled this gap already, right? It’s just a question, like close to that gap. And to me, I mean, this is just look at all of this that we left behind right here.
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And I really I mean, I think you have to focus on this right now because this was that ball flight that we talked about that propelled us. And then since then, what’s interesting about this too, is that if you just look at this stuff right here, this was the best that the Bulls can put up after. I mean, this was like a monster break in a very short amount of time.
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Right.
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Going from so 241 down to 189 and three weeks both. And this was the best that the Bulls can do was just little bounce back to 197 and back down below that price two weeks later. So not a very positive response out of the Bulls side. Your favorite side, the left click side.
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And now you’ve got I was talking to the couple folks this morning. You’ve got two massive gaps on this chart. You got one at $1.65. You’ve got another one at $2.20. And the big question is which one do we go, Phil? First, I hate to say it, but I think it’s $1.65. And I don’t think it’s going to be a quick trip.
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It sure feels that way, doesn’t it?
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It feels like it’s going to be just a brow beating bleed out to $1.65.
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Give me like I said, you’ve cleared all this. This was the best that the Bulls could do. Yeah. And then now you’ve got clear momentum in favor of the bears. Right here. Right. Me cross zero. First time that any sort of. Not only did we have a bit like a cross, but of oh call like a material cross because it bounces right back in.
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Right, like right here. It was kind of choppy. We crossed it for like a hot minute and then went right back. But here like it’s a clear cross. Right. And then continuation of that. And so if you just look at the like the momentum piece of it momentum it’s a secondary indicator. But it still does trade technically. Right.
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And so you want to be mindful of like there’s room for this bad boy to go. Especially if they give it braces. Then you’ve got room to go. But this also tells us, too that there’s room down to where this gap is, which is, dare I say it, they’re they’re 166 and 66 and some changes where it gets filled.
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Exactly.
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So I would agree this is no bueno. And it looks like it’s got some more room to go in. This gap would be kind of like a target, almost like a magnet.
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Exactly. I was asked the question, which one do you think gets filled first? I truly believe it’s $1.65. And like I said, it’s not going to be a quick trip. I think it’s going to be it’s going to be a grind. Yeah, it’ll be a grinder $1.60 $5.60 down there will probably sit there because after today’s GDP that was pretty positive.
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Check out podcast with myself for Mr. John Spain I were talking about the global dairy trade but their price now at 226 I think it is for cheddar cheese. We’re at $1.81. The discrepancy is getting larger the way that we usually do it as we go down too fast and then reorder prices in same thing, vice versa on the high side.
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But I just I feel like this is going to be a long, drawn out couple months of a downward trend. Sure.
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Short answers. Yes. Right. And then you start to get into like the question of like to your point, you have the solid Oceana price, right? At least from what we just saw. Now that could obviously change in two weeks. And you know, you you seems to be all hanging in there in terms of their cheese price. So how much of a discount can we really maintain for how long?
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All those things start to come into conversation to the lower that we go. But again we’re just looking at charts. As soon as we get a close here this week or lower, you got to think that this gap is very much in jeopardy of being filled. There’s room for more weakness out of the secondary indicator, and there’s obviously more room for this to break on the actual underlying itself.
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So and it’s you know, you think about like a seasonal standpoint, it’s what’s getting to be the right time of the year. Right? I mean the holiday stuff bought paid for are getting really close if you’re not already. And so what sort of seasonal demand do you have after that? It’s very maybe if the Packers make the Super Bowl, you buy all the cheese in the world and you’re just like, that’s it.
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Like we’re gonna have the biggest party known to man and in code is going to have pizza for everybody. And two stickers, not just pizza, but two stickers for everybody.
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Living the high life, you know, they change the stickers. So now instead of I voted they they’ve kind of I want to say got with the times to them that I still say, oh, I voted. It’s like a midwestern like, oh, excuse me. Oh I voted.
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Yeah, I.
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Voted. It’s 2025 here. Ketchup.
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What’s your sticker going to say? Like, you know, Costa, you know whomever running mate. Like it’s going to say, oh what’s it going to say vote.
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For me is a vote for.
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You. You’ve already got your slogan picked out like, I mean, this is I’m excited. Costa 2028. He’ll be able to be president at that point. Loaded up, loaded up. Everybody’s getting the pizza and two stickers. Let’s go. So what’s interesting is that, like, not only do we have room to go in the cheese chart, but we’ve started to see our next chart, which is also something that was coming at request internally from several folks is the December class.
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Sorry, has not been shy about maintaining a discount to current cash.
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I think we talked both this last week also. Right.
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When I talk about current cash, I always think about like I just check the spot number real fast, like 1892, call it 19 bucks. But like, you also want to add in a little bit of premium to the SR, especially the lower we go, if you like, you want to add in a little bit of premium, right.
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And so like if you believe that we need to add at least like, you know, call it $0.03. December is trading at a very slight discount to current cash, implying that spot has more weakness to go if you’re a new seller of December here at 1916, you believe that cash is going to continue to go down and like the Nasdaq, will continue to go down to any BSR.
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But this chart just by itself, I mean, it’s it’s at a point where this is where it really started to take off, right? It took a little dipsy doo right here and then just took off getting through that. Yikes. I mean, you don’t see a lot of relief until you can get down into here.
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Now, the only relief I will say that I see is on the RSI chart. I agree we have seem to bottom on the oversold territory.
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You have officially crossed into oversold. Now you can spend a lot of time overbought or oversold right here. This was August late August to call it close to a month. Not quite a close to a month. You basically spent overbought. So the idea behind that, what Cody just pointed out was it’s kind of a warning sign if you’re short, right.
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Because it’s basically implying that the market’s getting a little bit ahead of itself to the downside. And that if you are short, you may want to consider doing something about buying calls. It doesn’t say liquidate, but it’s just basically saying like, hey, like this is getting a little bit dicey here. That could persist for an entire month. So the idea would be, is that you would wait for that to basically cross back into, you know, like between in this range and then start trending higher.
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That is a big warning. Like this downtrend has ended. But I do like the call out for me because that is super interesting that you are starting to see signs of being oversold.
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The only part that makes me nervous is if you go back to the 31st, which was what last Thursday I think it was, we went to the oversold and then Friday had our rally, which brought us out of that. And then the past two days, today’s Tuesday. So yesterday and today we’ve just completely fallen off face of the earth again.
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And we’re still just in that oversold territory. How many times, to your point of getting down to 18, 50, $18, how many other times can we do this dance and still see a downward trend in December? Glossary.
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Some of this stuff does trade technically too. You want to be somewhat mindful of so I think you can even call this a very short term trend right here. If you use that recent bounce as like a point, you’re starting to get into some points where it’s getting to be a little dicey from the RSI standpoint, but you still have a cross like the major.
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What I would say like is a major downtrend there. Yeah, right. Which is this big blue line right there. So to me there’s still room to go for December from like a technical standpoint. But to your point there is signs from the secondary indicator market that says like you might want to think about popping the breaks a little bit.
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There’s some mixed signals. I mean, like I said, if you’re selling DS you’re selling a discount. But people they don’t seem to have an issue with it. Volume, price keeps moving.
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And let’s be honest, the next couple days as we get through this presidential election, the volatility is going to pick up.
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Sure. Oh for sure. There’s no two ways about it. We’ve seen it all these elections. I mean obviously any sort of large macroeconomic event can impact these markets. We’ll see. But it’s like as cheese continues to break something we’re right about, you know, that piece about that gap being filled and want to be a seller of December here now and especially like you get any kind of bump back up maybe seems like we’re due for some sort of like slight retracement.
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How many days in a row would be then lower. Right. So you do go back to the spread here. One, 23456789 1011. So cash like 11. Analyze like 15 plus sessions. The majority of them never been lower.
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Right.
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So it seems like you’re doing a little bit of a popper, but probably a popper to be sold at this point. I know how much you like hate to hear that. You’re just like dying to buy something.
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He’s like old adage, it’s hard to be going bullish to bearish.
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Just like you’re not even old enough to be president of here with that. Like, I can’t vote for you this year.
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One more year.
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All right. So something you may want to be bullish about beans. What do you think.
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Here is a gloomy request. Our good friend was Co.
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Phil asked about beans. Super interesting here.
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If you’re asking if I’m a buyer or seller of beans right now I am a seller.
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You’re a seller.
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Sorry, I’m going full bear on this one. I look at just going back to what you said about spot cheese. This is the best of the Bulls could do. Look at the past three trading days. This is the best that the Bulls could do. Seen. We could not keep and continue the momentum higher on the close. I feel like beans are going to fall out of it here.
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So I’m trading sub 975.
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And I take the other side of what you said. I would be a buyer by reasons for wanting to be a buyer here and now are, I think like when you look at it from like a risk reward standpoint, this is where you’re wrong call and 75. Right. And the last time we tried to get down there, we couldn’t even get a single close sustain there.
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Right. So years 979 probably in your face. So we did not test this. And now you’re starting to kind of claw your way out of it in a very, very small like pennant. Yes. These three bars, the way these are taking shape are a prelude to volatility. Right. But going back to our RSI in your commentary, you have this bounce supplemented with a failure to get back down there.
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And now this is starting to trend higher. You’ve cleared this right here. And now you’re moving up. To me that’s a sign of strength. So I feel like this is going to turn into one big W. And 1075 is in the cards, which would only be a 30% retracement of going from 1240 to 975. So like I said, I’m going to take the other side of you and say, I like the trade just because again, you’re buying it here.
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Where are we right now? Ten bucks. Ten bucks. Yep. Your risk is down to 975. I think your reward potential is another $0.75. It’s a 3 to 1 shot. Yep. And again the risk reward I like. But also to again it looks like a time to form the secondary stuff.
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I was gonna say the long term w I could see where the bullishness would come out of there. The prelude to volatility. I feel like it’s going to be to the downside. And when they get after beans, they’re going to really move this price there enough.
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So this is how trading happens when you get either in a seller. The match that I saw was up. Did you know that.
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Oh no he has to be mean about it. We can be on different sides and still have the.
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That works. Exactly. You know you’re just wrong. What? Anyways. All right. Now this is a super interesting one and.
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Oh the weekly.
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Yeah that’s the weekly okay. So this this kind of goes back to the idea that like yeah that 975 area is just it’s it’s dicey. So yeah it does the W complete itself or do we keep going down I don’t know. Do we know which way Cody wants to go. We know which way I want to go. I will say to what could be an interesting little trade.
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Let’s just go take a quick peek. What I really like about some of this stuff too is that the options. I just grabbed the chart at random here. The options themselves chart really well. So this is the Jan Beans 1080 call. I picked 1080 because it’s roughly around that 1070, you know, 1075 price. And you know, so the option premium I don’t know how much it agrees with me wanting to be long.
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Right. But at least if you wanted to take more of a conservative approach and say, like, you know, when I was last time, this was a 50 delta option right around September, right? And so if you subscribe to the idea that this will once again, kind of trade roughly the same premium, that option goes to call it like 35 $0.41 per bushel.
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Right. And so if you’re buying it today you’re paying call it $0.06. Your max risk is if you believe in the idea of just like, you know, puking them should it trading low call it like three and a half cents. So add in a little bit of slippage. You’re paying six, seven, three and a half. That’s two and a half cents worth of risk to potentially make, you know, take us back to where we were before, which is in like the 40s.
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So a little bit more of a conservative approach would be to say, let’s just buy some out-of-the-money calls. And, you know, once like the Delta starts to pick up as you get closer obviously to, you know, being at the money option, but then in a normal like nor are you risking an arm and a leg. So this could be another approach.
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Yes, it could be.
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But what’s neat about like I it something to be mindful of is when you’re looking at some of the underlying is how some of the options are charting to because that also plays a role. Right. Like what’s paper are they paying up to get calls bought for example, of this level or are they not. Or they pay it up to get put spot.
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Yeah. Oh like let’s see that one. Let’s just go take a quick look at like a tertiary chart.
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Not not necessarily secondary.
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Yeah. So here you go. Tertiary. So this is a daily of the champions. Let’s see what. There we go. That’s going to have more. The 960 strikes going to have more. So what do you think of this. Are you a buyer or seller of this chart.
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Oh I am a seller of that chart.
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This is the jam beans 960 put.
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See you got me. Yeah. I’d be a seller of that chart.
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How about that? So next time when you’re looking at some of these other lines, I like to look at like charts that have somewhat of a delta to them, but not like a 50 delta chart or 50 delta option’s likely just going to look a lot more like the underlying. But here I think you start to get some of the thought process around, like what are people doing to insure themselves against a move away from like the current price.
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Level next week and get to revisit this.
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Write that down.
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Write this down. But how come.
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You know, so like you got two stickers, but you’re not even wearing one?
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I know I’ll wear it when I go back for it.
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I’m like, right here.
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Yeah, yeah. All right. Well, Phil, we appreciate you calling your question in. And again on recurring sides of that chart, which is perfectly fine. All right. We’re going to check it out next week. See where we stand. A big shout out to Paige and Lexi for helping us get through yet another tech talk, working their magic on their side I hate it.
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I will be back with you in exactly a week. Have a great weekend and even better week. We’ll see you on the next Tech Talk.
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See ya.
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