Financials
Stocks: Stocks broke down below 11,000 on the Dow as we expected and we are now testing the first line of support at about 10,750 on the September contract. This support is flimsy at best and is not expected to hold. The next line of support on the Sep. contract lies at 10,700. This level is very significant and could cause a short term bounce, although in the long run I do not expect it to hold. My real target is a move to 10,500 by then end of next week. Friday is triple witching day so be warned as this will surely cause even more volatility than we already have.

Bonds: Bonds continue to be strong even after the recent rate hike. I expect this trend to continue in the near term as geopolitical events seem to spiral out of control exponentially from one day to the next. Bonds to have upside resistance just above the 108 handle, if we can break out above that then we will likely run straight for 110. I remain bullish but given how close we are to 108 I would not â�,��"chaseâ�,� this market unless we see a clear break out above 108 early next.

Energies
Crude oil hit our target of $77 this week and $80 in the near term seems like a forgone conclusion at this point, though personally I do not like it when something seems like a sure thing because it almost never is. With the situation in the Middle East nearing a tipping point the path of least resistance is clearly higher. Volatility is expected to increase even more so strap yourselves in, because we are in for one wild ride. Monday is August option expiration and that almost always causes a volatility spike of its own. I am a cautious bull at these levels and as always I am trading these markets via options to better manage the inherent risk of trading these markets during these wild times. Natural gas finally started rallying and I expect to see a move back into the 7.00 - 8.00 by the end of the month.

Metals
Metals continue the bull run. I expect to see $700 on gold in the very near future. Geopolitical and world economic events coupled with the normal supply and demand equation have this market poised to make a run at the infamous Hunt Brothers high back in the early 80â�,��"�s. First we of course need to test the highs from earlier this year and I expect that to happen sometime in September. Look for volatility to expand here as well. We are likely to see some sort of shake out in the not too distant future so keep trailing those stops. Any dip should be cautiously bought and here too I must recommend doing that dip buying via options to keep risks in check. Copper could find some resistance in the near term as we near $400 but this resistance will not hold in the long run so once we get a clear break out signal we will let you know.

Grains
Grains had a bit of a pull back in the ladder half of the week after continuing last week rally in the earlier part of the week. Corn is building another classic bull flag so get ready for the next leg up. As energy prices continue to climb the Ethanol alternative will look more and more attractive which will further extend the already increasing world demand for corn. Wheat too is poised to continue to rally. A break down like we saw this week in wheat only strengthens my option that this market will continue higher now that we have shaken out some of the â�,��"weakâ�,� hands. The soy complex continues to lag but I am expecting beans to break out above resistance at 625 this coming week. Use any pull backs in grains to enter the long side as this bull is still just getting started.

Softs
Oj looks as if it has now stabilized and I will be cautiously entering the long side this week with stops just below 155. Cocoa has found short term resistance and for now I am not going to buy this pullback. In fact puts could be the way to go in the near term. Coffee continues to struggle with the 100 level. I continue to like the 100-120 spread I mentioned last week but this market needs a rally sometime soon before I put any more on. We need to see a close above 105 before any large traders will pay any attention to coffee again. Sugar continues to sell off but as I mentioned last week this market remains a strong buy for the longer term. Sugar is a quasi energy contract these days and with Oil making all time highs it is only a matter of time before we see a significant rally in sugar. Cotton is the most frustrating market I have traded for all of 2006. This market just cannot get it together. I remain long via calls but so far this market has done little more than disappoint.

Meats
Meats, overall continued lower this past week. Bellies were the one exception but we are far from calling an all out bull here. I see continued consolidation in these markets next week and overall I see few opportunities here for my style of trading.

Forex Currencies
EUR/USD: The Euro failed to follow through this past week and we are now just slightly below a critical support level. Even though we are bellow this level I remain a bull. The recent strength in the Dollar is not likely to last, based on the overwhelming fundamentals, so this is likely to be one of the best long term dips to buy. I remain long via 130 calls which are now quite a bit out of the money but by the end of this moth I expect the Euro to be back above 130.

USD/CHF: The swissy continued consolidating this past week but we still have a bearish pattern that points to a move towards 1.20 in the near term. Sell short with stops above 1.24.

GBP/USD: The cable continued to consolidate as well and in fact held up better than the Euro. I see a move back above 1.85 this week. Long at the current level with stops starting just above 1.83 is the best trade I see early next week.

USD/JPY: The BOJ raised rate off of the zero mark finally and we are likely to see this pair begin to see a very volatile trading range for the rest of the year. Significant resistance lies at 116.75 so the easiest trade here is short at the current level with stops above that point. Aggressive trades should use stop and reverse orders as this pair is likely to run back to 119 if we break out above 116.75.

AUD/USD: This market is moving in the right direction but the pace is slower than I expected. I continue to target 76.50 in the near term.

USD/CAD: This market had an unexpected jump that stopped me out. I have not reentered since then but I see a rather intriguing bull flag on the daily so we may see a continuation of the rally in the near term but longer term I expect the 1.10 handle to be hit before 1.15.

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.