Financials
Stocks: Well the old sell in May and go away adage that I mentioned last week has held up so far and from where I sit, things do not look very good for stocks. Continued inflationary pressure, coupled with a Dollar that is falling faster and harder than a bird that has been shot out of the sky, will likely continue to weigh heavily on the stock market in the near term. Now that we have gotten below the psychologically important 1300 level on the S&P and broken down out of the rising channel support level, we have opened the door to a real bear move rather than just another correction within a bull move.

Bonds: Mr. Bernanke raised rates to 5% at the FOMC meeting and signaled a possible pause coming as soon as the next meeting. This should have been the catalyst for a bounce in bonds but clearly was not interpreted that way. Near term I do not see much more downside in bonds and feel comfortable buying or spreading calls at this time. Look for about a 2 basis point bounce in the very near term.

Energies
This week ended the recent pullback for Nymex crude oil as supply concerns for crude oil and gasoline were propped up by refinery problems and more violence in the Niger Delta. While the most recent Department of Energy report on inventories suggests that supplies are rising for both crude oil and gasoline, most traders seemed to focus more heavily on the demand picture that continues to come in bullish.

The most recent refinery issues come from Valero Energy Corp. and their recent announcement that they will be shutting down 15,000 barrels a day of gasoline production in order to complete repairs on the Texas City, Texas refinery. This obviously has traders on the edge as we head into the driving season that begins in late May. This is typically the time of year when refiners are building supply ahead of the seasonal demand spike. These most recent concerns have the Nymex crude oil futures market trading more than $5.00 ($73.90) higher than the recent lows on Mondays session when Nymex crude oil traded as low as $68.25

The geo-political picture continues to be checkered to say the least and the most recent news out of Nigeria continues to stoke fears of more supply interruptions out of that region. The MEND rebels (Movement for the Emancipation of the Niger Delta) are denying involvement in the recent shooting death of a foreign oil worker in the region. Nevertheless they are threatening more violence if their demands for domestic only workers are not met. Over 25% of the production of light sweet crude oil in the region has been interrupted by rebels associated with MEND. The production from this region is very hard to replace because the excess capacity from other producers is of a much heavier thereby lower quality grade. Nymex crude oil prices are greatly affected by losses of this type of production.

While the front month contract for Nymex crude oil is on the rise, there are a couple points of resistance ahead (74.99 and 75.35) that will need to be met with growing concerns on the fundamental front in order for this market to push through. There is also a bit of trendline resistance forming here and Iâ�,��"�m waiting for the market to violate that trendline (just above 74.90) before getting long again.

Metals
All I can say about metals is WOW! This market has been insane. We moved further and faster than almost anyone expected. The implications for the rest of the financial system are not very good. When Gold goes up as much and as quickly as it has, it says something about peoplesâ�,��"� overall attitude towards other assets around the world. It basically says that they are scared of the risks associated with those other assets. And scared they should be in my opinion. Gold is considered a â�,��"safe haveâ�,� in times of crisis. Are we in a crisis? Judging by the daily news here in the US one would have to say no, but since when has the US media ever gotten a story right? The market is telling, no screaming, that we are headed for trouble. What that trouble is I have no idea but the numbers donâ�,��"�t lie. An inverted yield curve has always been a precursor to a slowdown in the economy so why would anyone think this time would be different. That is what Einstein said was the definition of insanity â�,�Doing the same thing and expecting a different resultâ�,�. Again I hate to be the bearer of bad news but for those still wearing their rose colored glasses it is time to take them off and see things for what they really are. Near term I am still expecting a pullback or consolidation in metals this week. But longer term these bull markets remain very much in tact.

Grains
Grains ended the week with a bang. The USDA reports sent both wheat and corn through the roof. The soybean complex did not participate but I am not expecting this market to lag the other grains for too much longer. Grains should follow through this week on the back of the next round of scheduled USDA reports. Corn and Wheat will continue to lead in the near term but buying soybeans in anticipation of a â�,��"catch upâ�,� rally is anything but a bad idea. Like I said last week I expect grains to be one of the next â�,��"hotâ�,� commodities markets as we move from the beginning stages of a bull run in commodities to the intermediate stage. 
Softs 

OJ had a very strong week up until the last few hours of trading this week where we then had a rather dramatic breakdown. Last week I mentioned that we have very strong resistance at or near the 175 point on the charts. Near term I expect this corrective action to continue until we find support near the 150 level. Cocoa continues to move higher albeit at a much slower pace than we bulls would like. For now it is still a hold but buying long here if not already in seems a bit risky. We really need a close over 1650 before any real change in trend can be talked about. Coffee broke down through support and for now I am sidelined again on this market. Last week I mentioned spreading calls on this market and those who did that should stay with the trades early this week. If we get an early bounce then stay with it, if on the other hand we continue lower, I would exit the trades and salvage the remaining value by Wednesday. Sugar remained very much range bound this week as expected. I am getting more and more bearish this market each day so look for a move back below 17 this week. Cotton finally started moving up late this week. Cotton has now built a solid base pattern and we could quickly move back above 54 this week.

Meats
June Live Cattle finally broke through resistance and finished the week at 77.40. That puts our bull call spread for June in the money with a few weeks to go. Demand remains strong and we will probably hold this one to expiration.

Lean Hogs found a little resistance at the 68.00 mark for the June contract. I still expect that it will mo9ve higher but I'm waiting for confirmation through 70.00 before we jump back in. Matt Odom 5-12-2006

Forex Currencies
EUR/USD: I continue to fight the Euro. I continue to expect a correction and maybe the third time will be the charm. Action like we have seen these past few weeks is exactly why I have been a proponent of options trading over anything else. Buying puts on the Euro this week is the best trade I can see.

USD/CHF: Last weeks expectation of a bounce here too proved to be dead wrong. This current trend has been much stronger than most of us expected. Rarely do these markets move so much in such a short period of time with no counter move, but we are clearly seeing that happen right now. I continue to expect a counter move here too but I must say I am getting tired of fighting this.

GBP/USD: Here too the timing was off in terms of calling a top. But I do expect this market to finally correct this week as well. I am not trying to be stubborn on my position here, but rather my method of trading tells me to expect a pullback and while the timing was clearly off I do not expect the overall signal to be wrong.

USD/JPY: I am feeling like a broken record now but again I am expecting a bounce in this pair this week. For real this time!

AUD/USD: This market began showing signs of a trend change today(Friday). Look for this pair to fall quite a bit as we see Gold and Oil correct this coming week.

USD/CAD: This market is the only other one that gave me a real signal of a trend change this week. So I am using both the Ausi and the Cad as a leading indicator for the other major currencies at this time. Look for a bounce to at least 112 this week.

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

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.