Besides the holiday this week we have a number of important economic events. On Tuesday we have the Royal Bank of Australia meeting to decide on future interest rate policies. Then on Thursday we have a double whammy with both the European Central Bank and the Bank of England meeting to decide interest rate policies on their side of the pond. These meeting will set the tone for the remainder of the summer and should add to an already volatile picture in both the currency and debt markets.

Energy Complex (NYMEX)
Crude Oil

Crude oil continues to trade around the $70 mark. With all the terrorist activities we saw over the weekend it is a wonder that crude oil did not push much higher than it did. Terrorism threat could easily push this market back towards all time highs but at the same time a lack of terrorism could have an equal but opposite effect, pushing crude back into the mid 60's if no real terrorism happens in the next week or two. Either way we expect volatility to increase in this already very volatile market over the next two weeks so be ready for some sleepless nights in this market. Natural gas has sold off due to a lack of hurricane activity. It is still very early in the hurricane season, the bulk of hurricanes come in August or September so do not think we are out of the water yet (no pun intended, ha!) We feel that the recent sell off in Natural gas poses one of the best buying opportunities in this market for the summer.

Equities
SP500, DJIA, NASDAQ

The stock market continues to push back towards the upper end of its range. We have more than a 50 point range in the S&P 500 on the daily charts and we expect to test the upper end of that range at about 1550 later this month. We should then see one final push to new highs but after that our models show a high probability of a substantial correction before the end of the summer. Use this rally to purchase puts and or place stops on any and all long stock positions as the coming correction has the potential to be very ugly.

Financials
U.S Bonds

Bonds did take off to the upside after last weeks FOMC meeting and we are now raising our upside target for the 30 year T-Bond from 108 to 109. This market could push all the way back up above 110 but we feel that any upside beyond that is limited at best.

Metals
Gold, Silver, Copper

Gold fell briefly below 650 but has al ready rallied sharply back above it. We see this last sell off as the last opportunity to buy gold below 650 this year. With all the terrorist threats and w Dollar that is back to free falling the path of least resistance for the metals are up. Silver had a shake out as well but unlike gold it is forming what looks like a bear flag on the daily charts but even so we feel further downside moves are limited and last weeks low should hold for sometime. Copper looks as if it is going to rally back up to test the highs near the 380 level later this summer.

Grain Complex
Corn, Soybeans, Wheat

Grains had an extremely volatile week after Friday's crop report. We see wheat continuing lower in the near term, stopping out all those that were stopped in on Friday. Wheat could fall as far as 5.25 near term. Corn is on a straight sell off and has little or no chance of a real rally simply due to the fact that so much was planted this year. Soybeans are the only bright spot in the grains and we see this market pushing to and through 9.00 before the end of the month. We could then see beans testing the fabled 10.00 level before then end of harvest. Overall the best trade we have had in grains has simply been to spread long beans against short corn.

Softs (NYBOT)
O.J, Cocoa, Coffee, Sugar, & Cotton

OJ is bouncing and we are targeting a move back up to 150 before the end of the month. Cocoa has confirmed its upside break out by staying above 2000 for a number of days now. We are advising people to enter in to long call spreads in cocoa at this time. Coffee is struggling to hold support above 110. At this time there is a strong chance that coffee could slump back down to the 105 handle this week. If so use it as an opportunity to spread calls. Sugar did not sell off or rally last week but we will remain patient and wait for a close above 9.50 before attempting any long trades. Cotton is quite strong and our models show lots of potential for this market especially with plantings down as much as they are this year. We are targeting a move up to 70 by the end of the 3rd quarter on the December contract.

Meats
Lean Hogs, Live/Feeder Cattle, Bellies

Live cattle continue do drift lower and we continue to target a dip below 88. Feeder cattle bounced more than expected and at this time we will stand aside until a better signal develops. Hogs have been selling off for weeks but we see a dead cat bounce coming this week so real in those stops and hang on! Pork bellies did breakdown and push through our 90 target. We see this market continuing lower this week with a target of 85.

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.