Financials 
Stocks: Well stocks continued to breakdown this week, as I predicted in last weeks newsletter. In the very near term I expect a bit of a dead cat bounce, but overall I continue to believe this is the start of a real bear move not just another correction within a bull market. Our May S&P put spread expired today at max profit, we will use the coming bounce as an opportunity to buy or spread puts again.

Bonds: Bonds began the rally that we called for last week although it took all week just to get it started. Now that we have closed above 107 it opens the door to a possible run back above 108 this coming week. I continue to expect this market to rally as the CRB index sells off. John Murphy in his book â�,��"Intermarket Analysisâ�,� (which I highly recommend by the way) pointed out that Bonds and Commodities are inversely correlated. Mr. Bernanke pointed this out in a way when he said that the Fed would be watching for continued signs of inflation when deciding weather or not to raise rates again in the future. One of the main things the Fed will be watching is the CRB index. Derek Frey 5-19-2006

Swing Trade recommendation: Go long June Bond futures (USM6) and at the same time buy a June 107 put for a max risk of about $500 The option expires at the end of the week (05-26-06) so the trade should be closed out by then. If the market falls down you do not have to do anything, simply let the put get exercised if the market ends up below 107 on Friday. If the market is anywhere above 107 simply sell the long futures and let the option expire. More aggressive traders could move a trailing stop in on Friday rather than exit if they were so inclined. Profit potential is unlimited.

Energies 
Crude oil once again failed to break through resistance amidst news of gasoline inventories well above analyst expectations. Not only are inventories healthy but the refineries are far from working at max utilization. This has a cooling effect on the market as refiners should be able to capitalize on the seasonal lull in demand just ahead of the driving season that begins on Memorial Day.

In the meantime the rhetoric from Iran and Venezuela continue to pad the market with what I perceive to be a $15-20 fear premium that will not go away any time soon barring some kind of miracle. While the geopolitical concerns remain high and constant, they are accounted for in the current price between $68 and $69 and without some serious escalation they shouldnâ�,��"�t move the market any higher on their own.

One thing that is getting into the psyche of the public is that alternative fuel sources like E-85 (Ethanol based alternative) and others are becoming a more viable option for the future. This message has been communicated best by all the buzz created when Brazil became 100% independent of foreign oil by mandating the availability of E-85 at all fuel stations throughout the country. Sure there are plenty of problems with supply of the alternative here in the states but with energy prices where they are, there has been a increasing interest in solving those problems. Nevertheless, in these markets perception rules to a point and I believe that continued positive light shined on the subject will continue to cool the markets.

We exited our Crude Oil Put Spread for roughly 150% on Wednesday so look for a new position in energies from us later in the week.

Metals 
Volatility in metals remains incredibly high. Gold got whacked on Friday and is likely to continue to sell off this coming week. Minor support in Gold lies at 650 but that level is not expected to hold. Solid support lies closer to 606 so we may sell off all the way to 600 if this meltdown continues. Silver on the other hand I think will hold up better than Gold this coming week. While I still expect further downside movement in silver I do not expect it to be as extreme as gold. Solid support in Silver lies just above 11.60 so we may bounce off of that level this week. Copper is about as sure of a short trade as you can get. This market has moved so far up, with not even a slight correction along the way, that it has really set itself up for a rather dramatic pullback. We could easily see a pullback to 325 or even lower so if you are still long bring those stops up or just get out. I expect volatility in copper to spike this coming week.

Grains 
Grains spent most of the week trending higher. Wheat has been the leader of the pack but that market seems to be a bit overbought and I expect a bit more of a correction here in the coming week. Corn on the other hand has built a very nice bull flag and I expect this market to be most stable of all the grains this week. The soybean complex remains mixed and for now aggressive traders should consider spreading calls as we move back towards the lower end of the range we have been in. Derek Frey 5-19- 2006

Swing Trade recommendation: Go long July Corn futures (CN6) and at the same time buy a June at-the-money put for a max risk of about $250 The option expires on Thursday (05-25-06) so the trade should be closed out by then. If the market falls down you do not have to do anything, simply let the put get exercised if the market ends up below the putsâ�,��"� strike price that was bought. If the market is anywhere above that strike price, simply sell the long futures and let the option expire. More aggressive traders could move a trailing stop in on Thursday rather than exit if they were so inclined. Profit potential is unlimited.

Softs 
OJ to and supported out right near the 150 level that I mentioned last week. I honestly have no opinion on OJ at this level. It is a virtual coin flip in terms of where it will go next. Overall this is still a bull market and therefore I must favor the long side. Cocoa is struggling with the 1550 level as I mentioned it might last week. I continue to favor the bull side here too unless we close below 1500. Coffee continued lower and we may have opened the door to a continued bear trend in this market over the near term. I continue to be on the sidelines for now but strong support lies just below 100 so we could se a pause here before continuing lower. Sugar did breakdown but after doing some research I decided to go long October sugar calls. Buy Oct sugar 1750 calls and sell 1900 calls against them for 35 points or less. Cotton broke support and could be entering another bear trend but I smell a head fake here so I would not jump in on the short side just yet.

Meats 
June Live Cattle failed to follow through this week and finally took a corrective turn to the downside on Friday. This market is still a buy down here but if you were looking for any help from Japan on this one, don't. They have once again tentatively agreed to open up to US imports once again but not without creating such a bureaucratic and regulatory nightmare that some are wondering if it will even be cost effective to jump in.

Lean Hogs floundered a bit this week with not much news to trade on. Demand is steady but this market looks like it wants to correct a bit before moving higher.

Forex Currencies
EUR/USD: While the Euro did consolidate this past week, it failed break down by very much. I continue to be bearish near term and expect follow through this coming week. Target is 1.2600.

USD/CHF: The bounce that I had been waiting for has finally started and here too I expect to see more follow through this week. Target is 1.2400.

GBP/USD: Pullback has also begun here. Target 1.8500. I am not expecting a full on reversal but rather a violent pullback and then a sharp turn back up. So shorts should be keeping a close eye on these markets this coming week as we may sell off and rally back a few hundred pips all within the same week or so.

USD/JPY: This bounce has also begun and I am targeting a move back towards 114 near term.

AUD/USD: This market did sell off on the back of lower energy and metals prices this week. Expect more of the same this coming week. Target 7500.

USD/CAD: Last weeks change in trend signal that I mentioned proved to be right on. We did bounce up to the target of 112 as well. A further rally that carries us towards 114 is now in the cards.

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