Energies

This week past week was somewhat of a non event in the energy markets. Even though we saw the return of rising prices for the first time in a few weeks, it was done while the market was trading with extremely low volume and some more mixed inventory data.

The governments numbers came just as I suggested they would with a draw on the products and a build for Crude. As I mentioned last week, these numbers are not for the current week and reflect the demand from the previous week which was colder than average. These numbers should come in much more bearish this coming week as the refineries are working near capacity and temps have been extremely mild or warm throughout most of the U.S.

The latest blurb from OPEC seems to suggest that the Cartel will start to pare down production at their next meeting due to the fact that demand for product on hand seems to be waning soemwhat which was further evidenced by China's flat demand numbers for November. These numbers are significant because they have been the driving force for this market when there was nothing else to go on.

In short, watch for falling prices across the board this week as Crude inventories are in the upper region for this time of the year and the Distillate number should come in higher than we expected just a couple of weeks ago. Short term Bear Put spreads are relatively cheap at the moment and offer a safer way to play a near term pullback similar to the run up we just experienced.

Financials 
 
Stocks
Stocks struggled this holiday week. It appears that this was due to a lack of volume more than any real fear. Look for the “January effect” to start right away on Tuesday. As I mentioned the first two weeks in January are often quite strong.

Bonds
Bonds did chop higher as we suspected. I do not expect too much more upside but rather a choppy January until we get a clearer signal from the Fed on there next meeting which is January 31, 2006. This will be Mr. Greenspan's final meeting so I don't expect to see a dry eye in the room. 
 
Metals 
 
Metals continued to recover this week. It appears that we are poised to continue the rally in early 2006. I am looking for Gold to move back towards 540 and silver to be back above 950 in the next few weeks. I continue to stand aside of copper for now but my bias remains to the downside. Palladium and Platinum continue to be buys for me as well. Overall I see little so far to sway me from the bull camp in metals. 
 
Grains 
 
Grains took a bit of a breather this week which was no surprise. We may have hit a temporary resistance point in these markets and we could continue to see these markets pullback in early January. I am still a bull here and will be buying this dip but will wait for a few days to see if we will in fact correct more or stabilize, either way I expect to have some longs on by the end of next week.

Meats 
 
Live Cattle continues to consolidate and I still recommend shorting bounces as we head into the New Year. The Seasonal decrease in demand for the Hogs should continue to wear on that consolidating market as well. The entire complex is a short at these prices with the predicted mild winter ahead. 
 
Softs 
 
Oj started lower this week only to bounce late in the week. I still expect a full scale breakdown in this market after the holidays are over. Cocoa did confirm a break out late this week and I would now cautiously go long here, buy a put to protect as I am still not truly convinced that this rally is for real. Coffee pushed through my 105 target this week and I am still very bullish this market. Look for the recent high at 112.40 to be tested near term. Sugar, much like Copper, remains very overbought and ripe for a strong correction lower. Buy March 14 puts if you don't already own them. Cotton may now be ready to stage a rally up to 56 near term but approach this market with caution as overall it has not had a huge following yet.  
 
Currencies 
 
EUR/USD
The Euro struggled this week and may be setting up for a push down towards 117 near term. Long term however I continue to favor the bull side.

USD/CHF
I continue to stand aside this market for the time being. A move above 133 is the only thing that would cause me to take notice of this market near term.

GBP/USD
The Pound continued to fall despite my optimism. I remain long with stops below the November lows.

USD/JPY
The Yen did stabilize above 116 and managed to bounce back to 118. Chart looks like a bear flag to me. Sell 118 with stops at 118.50 this week. Target is back to 116.

AUD/USD
I got whipsawed in this market this past week and am now standing aside with a bias to more downside.

USD/CAD
Got my sells off this past week above 117 and have stops working at 117.75. Target is 115.

USD/MXN
Also got my shorts filled in this market this past week at 107230. Stops are working at 108000.

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.