Financials
The rally continues and I feel like I can just republish some of my newsletters from 1999, the last time this type of rally happened but for now the path of least resistance is up. We suggest buying a June Dow 134 put as a hedge, as it is not a question of if we will correct but rather when. We still need to see the S&P close at an all time new high which should happen this week.

Bonds hit our 110 target that I mentioned in past weeks. Bonds should stage a bounce back above 11 from here. Buy the July 111 calls and hold.

Energy
Crude oil hit our target of 65 and kept on going. We expect a brief stall at or near the 67.50 level and then marching back up into the 70's. Heating Oil should also move above 2.00 even though we use little of it this time of year. Gasoline is of course the main story in the energy complex and this market just continues to trend higher. With refineries shutting down and capacity already stretched to the limit, this market has major potential for price spikes should we see any further disruptions. Natural gas continues to struggle with the 8.00 level but we also see this market breaking out to the upside and pushing through 8.50 by the end of May.

Metals
Gold continues to weaken as the Dollar continues to bounce. We continue to see gold falling below 650 before the end of the month. Silver fell briefly below 13.00 and is now trying to hold the line above 13.00 but we see this market falling back towards 12.50. Copper fell almost to 320 and then bounced but this market is likely to see at least one more downside thrust before stabilizing and turning back up. We see a test of support at 300 as the downside target.

Grains
Wheat did hit our target of 5.00 but then turned back down. We see this market moving back up above 5.00 by months end. Soybeans also hit our target of 8.00 and continue to look strong. We should see a test of the Feb highs at 8.20 before this rally stalls. Longer term we see beans continuing to rally after the stall and we do expect to see them trading above 10.00 later this summer. Corn is trying to get a rally going but we see this market chopping between 4.00 and 3.50 for some time.

Softs
OJ is selling off and our 170 resistance level has held so far. We are now holding the July 160 puts and targeting a move to 150 in the near term. Cocoa is slowly moving up, look for an explosive move through resistance at 2000 later this month. Coffee has begun the next rally and we could see a substantial move in this market this summer. Buy 115 calls and hold. Sugar is still struggling but the turn around we are waiting for is getting closer. We are buying the March of 2008 10 cent calls this week. Cotton is trying to turn back up but we have seen more than a few head fakes from this market in the past so we will wait patiently for confirmation that this is more than a head fake.

Meats
Live cattle has stalled but feeder cattle has continued to push higher. Feeder cattle should stall this week below the 115 handle on the August contract. Hogs continue to drift sideways and we see that continuing this week. Pork bellies did stall at 105 last week as we expected and this week our downside target is a move to 100.

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.