Financials
Stocks: The stock market has now started to stall if not slide. I have been bear trapped so many times in the past few months that I am a very cautious bear at this time. We need the Dow to fall below 12,400 on the March futures contract to be convinced at all that the current uptrend might be broken. On the March S&P we need to see a break below 1410 and on the March NASDAQ 100 we need to see a break below 1750. If the market cannot break through these levels then buy the current dip. If the market is able to push below these levels then the bear slide is on and things could get very bumpy.

Bonds: Bonds continue to sell off and we are clearly on a path towards 110 in the near term. Support at 110 is strong and should cause the market to go into a sideways trading range once we get there. Look for continued weakness in bonds this week until we reach the 110 level. If for some reason we break through support at 110 then our next downside target is 108. Selling the March 110 straddle would be a great trade for all of you who prefer credit spreads.

Energy
The energy sector was finally able to stage a solid bounce on Friday. This has been the first significant bounce since we broke below $60. We are expecting this bounce to carry us up to somewhere between 55 and 57 by early February. Heating Oil should bounce to at least 1.60 in the near term, and Unleaded should find 1.50. Natural gas is the leader and should push right through 7.00 next week and could rally all the way to 8.00 in the not too distant future. Overall aggressive traders should trade the long side of energy for the nest few weeks. We or course recommend using options as a way to better manage the risk of those trades.

Metals
Gold and silver have ended the week strong. Near term Gold needs a solid push through 650 to revive the bull case. If we fail to push through 650 then we are range trading and short would be advised with a downside target of 605. Silver needs a strong push through 13.00 to bring back the bulls. Should it fail to do that then it too is range bound and short are the way to go with targets at 12.50 and then 12.25. Copper seems to be supporting out around 250. We could see this market consolidate around this level in the near term but there is about a 33% chance that we will break through critical support at 247 and if we do then we are on our way to 225. Overall I am more bearish metals in the near term then bullish. Longer term I remain a bull but over the short term the Dollar seems to have strength and that can and likely will hold the metals back from any significant breakout.

Grains
The grain complex has seen wild action ever since last Friday’s release of the crop report. Corn has seen a very large lock limit gap move and since failed to continue higher. Near term there is a chance we will run back to fill the gap but I think the genie is out of the bottle on this one and we are likely to see a test of the 1996 highs near $5.00 before this rally is over. Near term caution is advised as volatility is only going to increase as we move forward. Wheat has struggled the most and we are sill in a descending channel in this market until Wheat climbs above 510 we remain stuck in that channel. Buy any dips with stops below 450 on the March contract. Beans have been the best performer of the complex and are likely to lead the next leg up. A solid break out above 725 is needed for this next leg to begin but look for that to come later in the week. Soy meal is a strong buy on a move above 216 and bean oil is the laggard of the soy complex and could be one of the best buys near term. Longer term bean oil needs to see a break out above 30 to resume the overall bull trend.

Softs
Oj sure grabbed a lot of headlines this past week with the freeze in California. With all that in mind the path of least resistance is clearly higher. Buy or spread 210 calls. Cocoa continues to consolidate around the 1600 level if support at 1575 hold then we could see a resumption of the bull trend but if not then a break towards 1475 is likely. Near term I am a buyer with stop and reverse orders at 1562. Coffee is also consolidating and needs to hold above 17.50 to remain bullish. If we do hold that support then we need a push above 122.50 to bring the bulls back. Sugar has been beat up lately but it has been joined at the hip with Crude oil for some time now and since energy is turning back up so to should sugar. Cotton continues to struggle, near term we need a move above 56 to resume the bull trend but more than likely we will just see a market drifting.

Meats
For the past several weeks Feb Live Cattle have seen quite a lot of volatility, and this week was no different. The range expansion continues and open interest has been on the rise. Sell puts to take advantage of the high premiums. Feeder Cattle have been at the mercy of the grains and are now sitting on support near 95. If you are long corn or soybeans buy ATM calls in FC to hedge your position. Lean Hogs are testing resistance near 62 with open interest increasing. Look to buy a break out above 62 in futures with a stop below 61.

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.