Energies

Crude Oil continued its extended rally this past week as traders continue to focus on the geopolitical issues as opposed to the traditional supply and demand reports from the DOE. Iran continues to be a thorn in the side of the rest of the west as they refuse to squash their nuclear research program. This has the bears licking their wounds as the reliance upon inventories and current supply numbers has lead them down an expensive path.

The technical picture is shaping up nicely for the bulls also, as this past week provided a couple of pushes through key resistance I mentioned last week. These are definitely buy signals but the ability to buy on dips and place a relatively prudent stop is a foregone conclusion. Protective sell stops need to be in the 6300 range which is roughly $3000 or more in risk for any likely entry point over the next week or two.

My estimation is that this market needs a moment to cool if not retreat somewhat in order to make the necessary push through the all time high of 7111 for the March contract. This could happen in short order or it may take a few weeks. Either way, if you want to make a play here it would be wise to try a 6-8 week near the money option spread risking $500- $750 at the most.

Heating Oil broke out above 1900 and proved that the base commodity still rules when it comes to pricing the products. Unleaded saw similar action as it also continues to build in supply while prices rise.

The Nat Gas market made its way to the mid 9's again this week and I suspect it has the momentum to stack a couple more dollars on in the next few weeks. This market went down too fast for too long and is due for a sustainable run to the upside for the next few weeks.

Financials 

Stocks
My target on the S&P this week was 1275, we saw that taken out on Friday. We have now seen a decent pullback and I would not be surprised to see a â�,��"dead catâ�,� bounce this coming week. After a brief bounce I expect to see continued downside that should carry the Dow back down through 10,720. After 10,720 is taken out I would expect to see a fast move towards 10,500 on the Dow.

Bonds
Bonds managed to stay up this week. I did short bonds at 114-20 and then got stopped out at 115. I remain bearish and will look to put shorts on again this week near 115 with stops above 115-14.

Metals 

Metals had a strong week right up until Friday afternoon. Friday's late breakdown was quite significant for me. I will use silver to illustrate why. On Friday March Silver futures opened at 9.11, and then rallied early in the session all the way up to 9.2750. Then it did an about face and fell all the way down to 8.85 where it bounced slightly and then closed at 8.93. Any time a market does something like this it is a sign of exhaustion. Basically the floor traders caught a bunch of long buy stops early in the day and then blew them out. It shows that they ran out of buyers. This is a clear sign of a market that is temporarily overbought. Look for a violent correction this coming week but as I have said in the past...buy this dip! Metals should cool a bit if they are ultimately going to continue the uptrend anyway so bulls should see this pullback as healthy. This action we saw today is exactly why I advised everyone to tighten up your stops.

Grains 

Grains continued to stabilize this past week. After a strong sell off it looks as if the grains will now resume the uptrend. Beans should claw there way back above 6.00 this week. Corn should find it's way above 225 and wheat should see 340 before the week is out.

Meats 

Once again the Cattle markets fail to respond to the latest news with regards to the importation problems in Japan. A month ago the Japanese agreed to lift the ban on U.S. imports as long as they were under 21 months old and excluded some of the parts of the animal believed to be more prone to containing BSE (mad cow disease). This should have been rather supportive for pricing in the Cattle market but since then the market has been quite soft. This week however marked the return of the Japanese ban when a U.S. Shipment of veal was found to contain spinal material. There is an envoy of delegates from the U.S. headed to Japan this week to try and nip this in the bud but my guess is that this will probably be a long and arduous process not easily put to bed.

While the response from the market has been muted, I am looking for the previously established downturn pick up steam from here with the latest news. Sell bounces to 9650 on the Feb Live Cattle contract with protective buy stops in at 9800.

The Hogs took a breather last week as they consolidated between 5800 and 6000. I'm not convinced that this market has much further downside potential in the near term but I think the short side is still the one with the most potential in the near term. A break below 5510 in the Feb contract would be a great place to add to a short position.

Softs 

I guess OJ was just waiting for me to look the other way. The breakdown that I have been calling for finally started this past week. 115 proved to be temporary support, but I don't see it holding this coming week. Look for OJ to be below 110 by the end of the week. Cocoa is trying to get some legs but I continue to be uninspired by what I see. After a brief pullback Coffee continues to be strong. I would expect some further consolidation this coming week but I remain a bull. We have now exited our March bull spreads for a 200% return and will be putting May spreads on this coming week. Next upside target is 144. Continued strength in energy continues to support sugar. Sugar could see 20 cents before the end of this quarter if the current pace continues. Cotton continues a slow churn higher and I continue to expect to see a push back towards 60 before the month is out.

Currencies 

EUR/USD
The Euro was more subdued this week than I expected. We have made a very nice bull flag on the daily chart and I expect to see 122 hit early this week and a run towards 124 is not out of the question.

USD/CHF
I continue to be short and my objective on those shorts remains at 125 with stops at 129.

GBP/USD
We continue to be long, stops remain at 175, and my objective remains at 179.

USD/JPY
Got stopped out here at 115. For now I am flat but I am working a buy stop at 115.78 and a sell stop at 113.41.

AUD/USD
Got stopped out here as well. New Buy stop working at 75.77.

USD/CAD
My buy stop was filled at 117.55, but I fear this is the bad news. Stop is working at 114.25, and I do expect to be stopped out this coming week.

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.