Energies

Crude Oil found itself range bound once again last week, trading between 58.75 and 62.15. The EIA report that was released on Wednesday reflected a stronger than expected build in Crude and Unleaded and even showed a lesser than anticipated draw on the Distillates (Heating Oil and Diesel). While the demand figures came in 1.8% lower than the same time last year, they still showed an increase from with respect the the latest 4 week average. In a nutshell this means that demand seems to be on the way back from the doldrums since prices at the pump for Unleaded have dropped more than 30% over the past few weeks.

So once again we are dealing with mixed signals from the supply and demand picture. Put that together with the warmer than expected temps across the nation and the struggling refinery restarts in the West and you get what we have seen of late, range bound markets. This is not a good sign for the Bears as we head into the winter. While refining capacity should improve week after week, I'm less inclined at the moment to think that the market will react sanely to a cold snap or any signs of surging demand for Unleaded. The truth is that we are awash with Crude at the moment and demand is soft but the market seems to be supportive any time sellers enter the market. I think if we mix any bullish fundamental data with the current technical picture, we will be headed back to the upside. At this point I'm looking for a break through resistance or support for Crude on a closing basis before I'm sold on any direction.

Financials

Stocks
Continued earning strength coupled with overall optimistic view of the future keeps stocks up this week.  We are likely to see follow through this coming week as we see smaller traders chases this move higher.  Look for a test of the 10,635 level on the Dec. Dow contract sometime this coming week.

Bonds
Bonds continue to maintain trend and move lower.  I do see some bouncing along the way but overall we should test 109-21 and then a test of 109.  A break below 109 would be a new low for the year and I suspect that we will end 2005 on a new low for bonds.  As I have been saying, the Fed. long ago decided to move rates to 4.5% - 5% and we are now seeing that reality.

Metals

The Dollar finally managed to punch through to the upside and I must admit being wrong on my expectation of that failing.  Gold broke below 460 and silver found support around 7.40.  I now expect Gold to test the 450 level this coming week.  Silver too could continue to fall but I am not as bearish on silver as one might expect.  Silver is more of an industrial metal than precious metal and it can and has moved counter to the normal Gold and Dollar relationship.  I feel we may see that again here with silver holding this week?s 7.40 low and possibly moving higher while Gold tests 450.  Copper is testing the upper end of its range and I do expect a break out to the upside in the near term.  A run towards 200 seems in the cards near term if demand remains strong.  Platinum continues to drift sideways but for now I would be a buyer around 925.  Palladium is forming a rather strong bull flag on the daily charts and could be cautiously bought long here with stops below 220.

Grains

I feel like a broken record on these grain markets but I must continue to ignore them as volatility is very low and these markets just are not moving.  Overall they seem to be drifting lower but at such a slow pace it is not worth trading to me.

Meats

The entire meat sector has been a baffler over the past week. The current technical formation for the Hogs could either be interpreted as a new Bull Flag or a continuation of the previous Bear Flag. We're holding a Bear Put spread in the Hogs at the moment and if we break to the upside on Monday or Tuesday, it will be time to salvage for about half the premium we risked.

The supply and demand data across the board is a mixed bag and I am recommending my clients not enter any new positions until next week.

Softs

We have, as of today, exited 90 % of our OJ positions at over a 220% return in less than 30 days. OJ is sure to test the 125 level near term but I am not sure of much beyond that.     Cocoa continues to struggle but seems to be bottoming.  As I mentioned last week Cocoa usually has a seasonal rally this time of year so buying near the money calls is the safest way to catch that rally if it comes.  Buying last weeks dip in coffee as I advised worked well and now I suspect coffee is gearing up for a move above 110 near term.  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 just barely fell below 51.50 today.  I am still a long term bull and feel that long term buys down here will do well by the end of the first quarter 2006.

Forex Currencies

EUR/USD
Well all I can say about the Dollar is ouch.  While I do not see a huge breakout rally coming for the dollar I also do not see it falling back to the mid 80?s anytime soon.  117.59 is final support for the Euro and if that fails we could see a fast run towards 110.

USD/CHF
Friday's high in the swissy is a breakout and I would
not be surprised to see 132.50 near term

GBP/USD
Dollar strength pushed the pound all the way to 175.  Final support for this market comes in at 172.73.  If this fails to hold look for a rather large move down to support around 160.

USD/JPY
This market is on fire and not even an ocean can put it out.  While it is strong it is starting to feel like a top is near.  Significant resistance exists around the 120 level so we should see this market begin to go sideways as we approach 120.00

AUD/USD
Stop and reverse order has been filled and I am now short from 74.25.  I expect to see 70 in the not too distant future.

USD/CAD
Canadian Dollar got a boost from a weak dollar as well and I still think my target of 120 will be achieved this week.

USD/MXN
Peso continues to slide lower.  I see nothing stopping this market from testing 10.60 near term.

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.