Financials
Stocks: Stocks rallied up to resistance near 11,300. After looking at the market internals it has become clear that this current rally is based on short covering much more than any real fresh buying. The COT report continues to show small speculators as the only group currently long stocks. Both funds and commercials are net short and rarely has the entire market been held up by the â�,��"little guyâ�,� for very long. I must continue to raise the caution flag on stocks and again if you have not yet protected your downside risk I suggest you do that soon while you still have time.

Bonds: Bonds bounced off of the wall of resistance just above 108 that I mentioned here last week. I expect this resistance level to continue to hold this market back in the near term. I see bonds remaining range bound and falling back towards the lower end of that range as we get closer to the FOMC meeting on August 8.

Energies
The energy complex spent the week drifting lower. While the distillates stayed within their established range, crude oil did manage what could be a downside break out. I remain a bull of energy and feel that this move is little more than a downside head fake. Buying the distillates at their current support levels is also a great trade for aggressive traders. Stops can be run relatively tight since we are nearing support in these markets. The geopolitical situation remains unstable at best and this is the main catalyst for the current rally. Natural gas has finally woken up and is now in bull mode and will likely continue in the near term. I am targeting 8.00 in September Nat gas within the next two weeks.

Metals
Gold did in fact follow through to the upside this past week and we are now nearing our target of 650 on the August contract. I expect the high near 675 to be tested sometime in the next two weeks. Silver did manage to achieve my target of 11.50. I see 12.00 being hit this coming week. Look for a strong bid to come back into metals in the near term. Copper did rally back up off of support as I expected. I am targeting 375 this coming week. Resistance at 375 is significant and is likely to hold this market back in the short term but longer term I see copper moving above 400.

Grains
Grains had a rough week again and failed to get the rally started. Wheat fell back instead of following through. Corn held support but beans did break below support briefly only to end the week just barely above support. I see these levels holding firm this coming week and we are likely to see the rally that I was waiting for this past week materialize in the week ahead. Oats is a market that I follow but do not comment on much. I have recently been attracted to this marketâ�,��"�s daily chart as we could see a substantial breakout from the consolidation in the near term.

Softs
Oj took off to the upside right out of the gate this week. I expect this market to follow through this time and break out above 175 sometime within the next 8-9 trading days. Cocoa spent the week drifting sideways as expected, this trend is likely to continue next week as well. We may see a small rally to try and fill the gap left near 1550 but do not get suckered into this move. Once the gap is filled look for the market to fall back to range trading. Coffee did rally off of the key reversal pattern I mentioned last week. We broke out above my target and I do expect this rally to follow through. My next target is resistance at 107.50. We may stall at this level but not for long. Sugar continues to sell off and for now the bull side of this market is dead. While I remain a longer term bull and am using this sell off to get long March of â�,�˜07 sugar, I am approaching this market with caution. Cotton started the week moving above 56 as I had mentioned last week but then stalled. We spent the rest of the week consolidating within a very tight range. On the daily chart this appears to be a bull flag and therefore the path of least resistance remains up. I expect my objective of 58 to be achieved this week. Overall the bull seems to be waking in cotton but I have gotten the horns form this bull in the past so I remain cautious.

Meats
For the most part this group continued its choppy drifty trade, with one exception, lean hogs. The market actually got a pretty good bid off of the support level between 66-67. This might actually be a tradable move as it offers a good tight stop with quite a bit of room to the upside. Monday morning would be a good time to watch for a follow through if the shorts are still holding. Derek Frey 07/28/06

Forex Currencies
EUR/USD: As noted in last weekâ�,��"�s commentary, strength in the Euro provided two tests of the resistance level 1.275- 1.28. In the intraday action, very strong upside momentum was followed by orderly pullbacks and new highs; this is a good sign for the strength of the overall trend. I believe we might see a brief consolidation at the current level, though I any breakout through the 1.28 level would offer a good entry point for a move up towards 1.30.

USD/CHF: Playing the short side of the swissy would have been quite a good move this past week as sellers were definitely in control. There is a bit of congestion between 1.22-1.23 that may provide some short term support but I believe we could see further weakness in the short term and maintain a target of 1.22.

GBP/USD: To begin the week, the cable saw a bit of selling which drove it back down to support @ 1.84. After a strong bounce off that level, the pound followed through to the upside rallying all the way to the resistance @ 1.86. In the near term it seems as though the cable will likely consolidate or retrace some of the recent move while rebuilding momentum for a move through resistance.

USD/JPY: The dollar took quite a beating from various fundamental and technical factors. Heavy selling late in the week hit the dollar quite hard and it seems as though the market may continue to fall on its own weight. I expect there will be a bit of a bounce at some point, though I remain bearish and continue to favor the short side on this pair.

AUD/USD: This pair finally caught a bid an actually followed through stronger than I expected. I would be cautious as the market is becoming overextended, though with such strong upside momentum it may move up to .7750 before taking a bit of a breather. At this point I would trail with a pretty tight stop just to ensure that I protect my profits from such a strong move.

USD/CAD: The bull flag I mentioned last week actually followed through with a strong gap up, though the last few days saw a pullback to fill the gap. I remain cautious about the bullish appearance of the recent movement, as it seems like this pair has been drifting upwards, leaving itself open for some heavy selling. Furthermore, the strength of the dollar in this pair continues to remain divergent from its other pairs.

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.