Financials 
Stocks: As I warned last week, stock did falter after posting a new high on very low volume. We are looking at testing support at 12,400 on the March Dow contract this week. If that fails to hold then we are likely to test 12,200 which is the next line of support. Frankly if this market is to move higher in the long run then we need to correct in the short run. A dip below 12,000 would be considered healthy for a longer term bull market. Although personally, I remain unconvinced of overall Dow strength in 2007.

Bonds: Bonds had a wild week and an even wilder Friday. We continue to expect a move to 110 on the March contract in the near term. Economic data continues to conflict from one report or revision to the next and that has the Bond market chasing its tail. This increase in volatility is likely to continue for at least the 1st Quarter of 2007.

Energy 
Crude oil really took it on the chin to start off the New Year. We have already taken out support at 55.75 and in doing that we have opened the door to a possible 50% Fibonacci retracement, which would take Crude oil al the way down to $48 a barrel. The overall bearish theme is also spilling over to the distillates. Now that the bears have control look for more downside moves in the near term. We had a lot of â�,��"Johnny come latelyâ�,� funds pile into the energy markets near the top so look for many of them to liquidate their positions if they havenâ�,��"�t already. Most of these funds are trend following and the trend is now down but many of them are slow to react. Natural gas is the only market in the energy sector that could stage a near term rally off of support at $6.00, but if these unseasonably warm temperatures continue, then even a strong support level will not hold any of these markets up.

Metals 
Metals also had a very rough start in 2007 as well. We started the first trading day of the year moving higher only to turn 180 degrees around and free fall almost straight to $600 in Gold. Near term it looks like we will test support just below $580 Longer term we remain bullish and will look to buy long after a test of the above mentioned support level. Silver too could continue to fall and strong support lies just below $11.00 so we could see a large downside move again this week. Copper is also very bearish in the near term and could be even a longer term bear. Trade with the trend in copper and the trend is down for now. Strong support in copper lies around 225.

Grains 
Grains have held up better then many other commodities this past week. They are expected to be one of the leaders of the commodities complex in 2007. Just take a look at the weather we are having and you can imagine how hard of a year 2007 is going to be for farmers. What bad for farmers is good for price so look for grains to continue to move up this year. Wheat is bouncing off of descending trend line support, a rally back to 5.00 would take us back to the top of the channel but until we move back above 5.25 we cannot call a resumption of the bull trend. Corn is also bouncing off of channel support and a move back to 390 seems very likely. A move above that level would signify a resumption of the bull in corn and that looks very possible in the near term. Soybeans are in the middle of their range which makes them a more difficult call. But if the rest of the grain complex can rally then beans will follow. A break out above 7.10 would signify a resumption of the bullish trend in beans.

Softs 
OJ continues to drift. We continue to see greater potential for a quick downside correction than a rally, but longer term this market could continue higher for some time. Cocoa corrected wildly to the downside on Friday and filled the gap. If we can stage a recovery early this week then the bull is still alive. If we cannot recover then we have put in a temporary top and are likely to see support at 1475 tested again. Coffee too came under pressure and may test support at 118. Coffee remains bullish longer term. Sugar is testing channel support at 11.00 if it holds then we have a good buy with a target of 1250. Cotton followed the rest of the complex lower but should hold up over the longer term. We see support at 52 hold and being a good buy point again if in fact we get there.

Meats 
The recent weakness in the grain complex has created some fundamental buying in the cattle market. In addition, heavy snowfall in parts of the Midwest may also become a factor for cattle, though the long term effect remains uncertain. Last week Feb Live Cattle became quite volatile as the contract vacillated near overhead resistance @ 93. Expect continued strength if buyers can sustain a move above that level. Jan Feeder Cattle has been unable to break through 100 resistance and until that level is broken look for continued range bound trade. Lean hogs also saw increased volatility as the Feb contract gapped down through support @ 61. If prices cannot rebound through 61-62 look for further downside.

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.