Energies

Crude Oil struggled to find direction this week as neither support nor resistance was broken. We failed to see a continuance of the previous weeks dip below 60.00 a barrel and the mixed API data did little to clarify future expectations. Many analysts were surprised to see a continuation of the declining demand numbers for Unleaded from this time last year. Together with the larger than expected build in Crude Oil inventories (4.4 m/b increase as opposed to 2 m/b expected) this would seem to be enough to sink this market in and of itself. However, winter is coming and Distillate inventories continue to drop at the time we should be stockpiling builds for the winter.

Nat Gas rallied strong ahead of Thursday's inventory data but found it hard to sustain with larger than expected builds bringing the market back into the 12?s during trading on Friday. The recent Nor-Easter seemed to be indicative of the cold winter many have feared but those fears have been quieted for now as temps across the country have settled into a much milder range as the week progressed.

I am still a Bull for the Heating Oil and Natural Gas markets but I don?t see Crude being able to make a convincing run to the upside with inventories where they are now. We just entered an intermediate term Heating Oil Bull Call Ladder Spread and I continue to hold February Puts in Crude.

Financials

Stocks
As I suspected last week the Stock market did not follow through to the downside and is now trying hard to rally back up above 10,400.  We are recommending a short term bull call spread at this time by buying the Nov. Dow 105 call and selling the Nov. Dow 107 call as a spread.  There is a very strong seasonal tendency for stocks to rally for about the next four weeks.  The trade I suggested above is a great way to be positioned to take advantage of this trend if it develops while keeping risk in check.

Bonds
Bonds Managed to break down this week after a brief dead cat bounce late last week.  I continue to be concerned by the excessive small spec short interest.  We are doing our FOMC Bond strangle again for Tuesday?s FOMC meeting.  I expect a rather dramatic increase in volatility in Bonds after this Fed. meeting due to all the chatter about this being the 8th inning again.

Metals

The Us Dollar did fail to follow through to the upside this week.  This should have given metals boost but was not enough to get them to breakout to new highs.  Gold continues to consolidate around the 475 level, while silver is doing the same around the 7.80 level.  Copper too is consolidating around the 180 level. Palladium has been the exception as it continues to make new highs.  Platinum is trying to follow Palladiums lead but so far has struggled to break out.  All of this points to the strong possibility of a continuation of the overall bull trend we are seeing across all metals.  Since we have seen such strong consolidations lately it is reasonable to expect that we are only days away from a break out.  This Friday's late dollar rally is likely to fail next week just like last Friday?s dollar rally failed to follow through this week.

Grains

I continue to be unimpressed by anything I see in the grain markets.  I normally trade the markets like mad but so far this season I have just not seen anything really worth going after.  I would still favor Wheat or Oats over other grains but only if you forced me trade grains at all.  For now I must continue to ignore these markets as they seem to ignore everything and simply drift.

Meats

The latest rally in Live and Feeder Cattle seemed more like the last gasp before we head lower in the next few weeks. We are still playing Feeder to the downside via Put spreading and expect overpriced Call premium to be a good sell here.

Pork Bellies and Lean Hogs both broke support on Thursday only to rally Friday and keep us guessing. Bear Put Spreads are cheap here and we are taking advantage of it counting on this being a slight short squeeze ahead of the next move down.

Softs

Wilma's path took her directly through the heart of the Florida citrus groves.  So far damage estimates are scattered at best, but severe damage is expected due to the track and strength that she came through with.  Chasing OJ higher is not recommended but I recommend holding an existing long position.  Cocoa continues to try and begin a rally but every time it seems to fizzle.  Cocoa should have a seasonal rally any day now but for my part I am still not that excited by what I see.  Coffee spent this week pulling back and buying this dip is advised.  Sugar continues to stay up and seems content in its current overbought state. For now (besides holding some puts) I continue to stand aside.  Cotton is still pulling back but should hold support above 51.50 on the Dec. contract.  I'm still a Cotton bull and I'm long a 59-63 March call spread at this time.  I expect Cotton to be well over 60 by the end of 2005.

Forex Currencies

All Currency comments are based on Forex numbers.

EUR/USD
The Euro did try to stage a rally this week but was largely held back by the rather stagnant Dollar.  I do expect further downside on the Dollar so the Euro should rally this coming week.  Wait for a move above 122.00 to get long.

USD/CHF
With the Dollar failing to follow through the Swissy also failed to breakout above 130.  I do not expect much strength in the dollar this coming week so look for this market to continue to fall.

GBP/USD
The Pound did begin moving towards 180 but fell slightly short.  I do see 180 being broken through this coming week.

USD/JPY
I continue to be bullish this market and expect to see a move towards 117 this coming week.

AUD/USD
My stop and reverse order at 74.25 so far has held and I do think we should see the beginning of a rally this coming week

USD/CAD
The Canadian broke out mid week only to pull back 300 points in the next four days.  I look at this as the final shakeout before a dramatic rally that caries us above 120.00 near term

USD/MXN
The Peso continues to drift sideways this past week.  I am bullish this market but not overly bullish.  I would prefer the Canadian if I could only be long one currency.

Risk Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.

Matt Odom is the Managing Partner and Energy Analyst and Derek Frey is Head Trader at Odom & Frey Futures & Options.