Financials
Stocks: The stock market is a runaway train that cannot be stopped. I continue to be bearish, but must have personally provided the Dow with a few points when I too covered my shorts on the break out to new highs. We will continue to hold our Dow puts as downside protection in case of a pullback but nothing has been able to pull this market back. Near term we will more than likely drift slightly higher. The extremely low VIX indicator is normally a contrary signal so that could be foretelling of a pullback to come.

Bonds: Bonds have now really started to correct. This idea that the FOMC would be lowering rates is bordering on crazy, and bond traders finally acknowledged that this past week. With the stock market moving to new highs there is little reason to bid bonds up. We continue to favor the downside and will use any significant rallies as selling opportunities. We are targeting a move to 111-16 this week and a possible test of support at 110 before the end of the year.

Energy
The energy markets tried to pullback, and as we mentioned last week, OPEC did step in with a production cut. This should not have been a surprise to any of our regular readers. We then saw crude break out to the upside, breaking out of the classic bull flag we have formed. This pattern points to a move back to at least $66 in the near term. Longer term we could see a mid winter rally back to $70 or even higher. This argument that Crude will fall to $50 is about as likely as the FOMC lowering rates so do not be fooled into this pipe dream. Natural gas has struggled recently but this market is a sleeping bull that always wakes at some point in the winter for obvious reasons. We are expecting this wake up call to happen during the next two holiday weeks while most traders are not paying attention. Long trades with stops below 7.210 and a target of 9.000 are a great trade in our opinion.

Metals
Metals ended the week with a huge downside plunge. Last week we warned that we could see this coming and I hope long traders headed the warning and put tight stops in. This correction is likely to continue in the very near term. Strong support in Gold lies between 610 and 615 so look for that level to slow or even stop this correction. Silver really got hit hard falling almost $1.00 or 7% in one day. Support in silver lies at about 12.50 and then at 12.00. Copper is struggling with the $3.00 level, but aggressive traders should view this as a buying opportunity. Copper is a need not a want, and Asian needs as much copper as they can get their hands on to continue the modernization. The last line of near term support in copper, lies at 2.97. If we fall below that then we could see a plunge to 2.25. That kind of a move is possible but not likely. We could see a longer term correction in these metals, but do not be fooled into the idea that the bull in metals is dead. The bull may be looking to take a mid winter nap but he is far from dead and will awake with a bang after getting some needed rest.

Grains
The soy complex spent most of the week drifting sideways, with Bean Oil being the exception with its break out to the downside today. Last week I mentioned that Bean oil looked like one of the best near term shorts in the grain complex and I stand by that. Corn and Wheat managed to stabilize and our Long wheat short corn spread has also improved by over 15 cents this week. I continue to favor that spread over all other grain trades in the near term. Oats tend to be a leading indicator for the grain complex and we saw that market begin to move higher this week. This could be the beginning of the next leg up.

Softs
OJ gapped down big time on Monday only to find support and end the week attempting to fill the gap that was left by Mondays fall. Once the gap is filled we could finally see a real correction take shape. Long 195 puts for March seems to be the best way to position for this correction. Cocoa continued to rally this week falling just short of 1700. We continue to be bulls but are now tightening our stops up 1625 to protect profits. We could see a quick correction and if we do we will look to go long again. Coffee is also increasing in volatility and that should lead to further upside. We do have some formidable resistance in the 130 ââ,¬â€œ 132 range so look for the market to struggle with that near term. Longer term Coffee could move back above 2.00 so look at any big dips as buying opportunities. The monthly chart is building a flat topped ascending triangle which is usually a very bullish pattern. Sugar cannot seem to get out of its own way but even slow starters can be great performers in the long run. Longs with stops below 1110 seem to be the best near term play. I continue to like what I see in cotton, but near-term I remain cautious. This market can move big when it wants to but so far it has only moved in fits and starts. This week if we got the move above 54 we talked about in the last issue. I am now cautiously long with a target of 56. If we do manage to break through resistance at 56, then this market could really take off.

Meats
For the last few months Feb Live cattle encountered some strong buying near the 88 level. However, the upper end of the range has been declining during that same time with a series on consecutively lower highs. For now trade the range between 88 and 90 1/4, until we can sustain a move above or below that level. Jan Feeder Cattle successfully held support @ 9750, and if buyers can push above 100 look for renewed buying for this market. Near term resistance between 103 & 105, and open interest has remained strong during recent weeks. Feb Lean Hogs continued their recent weakness and are now approaching some support near 61. I would look to sell a break below that level, though I expect some type of consolidation between 61 & 62 in the short term. Upside resistance remains strong @ 64.

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.