Here today, gone to Rio. Be back in 2007.

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March cotton futures on Thursday popped to a fresh nearly three-month high of 55.50 cents a pound. Bulls do have upside technical strength, as they have worked prices well off the contract low of 50.81 cents, scored in late November. The next upside price objective for the cotton market bolls (woops, I mean bulls) is solid chart resistance at 56.50 cents.

March cocoa futures on the New York Board of Trade on Tuesday hit a fresh five-month high of $1,694 a ton. On Wednesday morning the market is seeing some profit-taking pressure from recent strong gains, but no technical damage has been inflicted. In fact, price action the past week can be considered a "pause," whereby prices have traded in a general sideways fashion on the daily bar chart, after a recent strong surge higher of around $200 from the November low.

During the Roman empire, ruthless leaders became fascinated with the possibility of world domination. By extending its military and conquering lands throughout Europe and Egypt, Rome became arguably the greatest sovereign state the world has ever seen. Eventually, however, it became a mammoth too large to contain, and enormous amounts of money were required to sustain Rome's control over distant lands. Without enough gold in the bank to finance their operations, the government decided to trick its citizens, by placing less gold into each Roman coin.

Perhaps, now that some of the air has been removed from the helium balloon, it appears that prices in the housing market have softened. The bottom line is that the housing balloon has simply corrected its excesses and, is really in fine shape. Looking at the cost of money, there is some good news for the home buyer; rates have been dropping which, helps the affordability of housing. Now, for the house flipper, or condo flipper, "don't give up your day job just yet."

This week was quite active on the U.S economic front. Several key announcements gave traders insight into the fundamental factors driving the foreign exchange market. The first major event was Tuesday’s FOMC meeting on interest rates, the result of which left the target rate unchanged at 5.25%. The committee cited a substantial slowdown in the U.S housing market and a labor market near the upper end of its capacity as the two main drivers of policy decisions.

The Dollar continues to be weak, but we feel that since we are long most of the other currencies against the Dollar, some kind of "hedge" is prudent. This trade is a great hedge for any of you who are currently long The Euro, The Pound, The Yen or really almost any other currency against the Dollar, whether that be in futures or FOREX. While fundamentally the Dollar is very weak, technically we could stage a medium term counter move or dead cat bounce, and this trade would take advantage of that.

Silver has seen a very solid bull trend over the past few months and more recently, has been consolidating around the $14.00 level. This consolidation has formed a bull flag and this trade is simply a low cost way to be long an at the money call. To buy the 14.00 call by itself, rather than doing the spread we are suggesting, would cost you in excess of $2500. I mention this so you begin to understand why we do these trades as spreads. Frankly the cost of these options without the spread is too high for the average trader's risk tolerance. That is one of the primary reasons we prefer these types of spreads.

For the last 3 months the ceiling for the cotton market has been just above 54. Three prior attempts to push through that level failed and sellers obviously controlled above that level. However, the most recent pullback was much shorter and shallower than the previous moves, and it now appears that buyers may have the necessary strength to break the resistance. In fact we did manage to break out through that first line of resistance at 54 on Monday 12-11-06.

Knowledge of the past and awareness of the present are essential if you intend on successfully navigating the commodities markets. To make the most of your time in these markets--whether you're trading or hedging--you need the invaluable insights that can only be found in the inaugural edition of the Commodity Traders Almanac.

Last week the main story for the U.S Dollar was Friday’s NFP report. Contained within the report was an upward revision for the prior two months’. This adjustment added 42,000 jobs and painted an unexpectedly resilient picture of the U.S Labor Market. However, keep in mind that a tight labor market can contribute to inflationary pressures, and it is imperative to examine the changes in wages.

CME, the world's largest and most diverse financial exchange, today is celebrating the 25th anniversary of its benchmark interest rate futures contract, CME Eurodollar futures. This contract is the world's most actively traded short-term interest rate contract and is used by financial institutions to manage interest rate risk across the entire yield curve.

The Dow continues to be propped up by, at this point who really knows, but it is certainly not reality. This market has ignored every red flag we have seen these past few months. You have all heard the saying that says "the bigger they are the harder they fall", well that is exactly what we feel this market is setting up to do. Market internals are not good by any measure and frankly the signs of continued inflation are everywhere.

The market continues to push into new territory of all-time and multi-year highs, yet it also appears to be putting positive spins on negative data releases and attaching itself to positive economic data. Housing weakens here; manufacturing slowdown there, retail sales disappoint here and inflation isn’t moderating over here. That is all I heard last week, but it seems as if not too many people are picking up on it. More importantly, it’s almost as if the market just kind of forgot about inflation being a factor in the market.

Live cattle is a market I do not trade very often but after going over my weekly view of all the markets, I could not ignore the weekly chart pattern. Here, much like in the wheat trade, we have built a classic bull flag pattern while also doing a 50% fibonacci retracement, and small traders are also short this market as well. These types of pattern combinations have served us well in the past, and are not to be ignored.

Wheat has been the leader of the grain complexes' rally so far this year. It has also lead the pullback that we have seen in the very recent past. The pullback has been a classic 50% fibonacci retracement and in doing that retracement we have also formed a classic bull flag. The current commitment of traders report shows small traders continue to remain short this market which should give this market lots of upside momentum as we blow through the short traders stop loss orders.

Last week we saw continued weakness on the U.S economic front. The ISM report came in last week at 49.5, the lowest level in three years. This did not bode well for the dollar and it continues to show signs of weakness versus most of the majors. We have been bearish the dollar for quite a while. As oil prices push back into the low to mid 60’s, expect a renewed concern about the spillover from higher energy prices into inflationary measures. What does all of this mean?

Sugar has just recently supported out at a long term support level. On the daily chart below you can clearly see a flat topped rising wedge pattern that is often a sign of a market bottom. This market is beginning to turn and we are now seeing signs that this market could begin to climb. This is a longer term trade than usual but with good reason as we feel this market has the ability to resume its longer term up trend and retest the old highs.