Sign up for you complimentary CD-ROM "Trading Commodity Futures". Brought to you by FuturesOne.

Sign up and get your complimentary educational seminar. This interactive CD-ROM introduces you to the fundamentals of futures trading. It lays out easy to follow trading examples along with additional resources to help today's commodity trader. This comprehensive educational CD-ROM was developed by the Chicago Mercantile Exchange and brought to you by FuturesOne. To get your complimentary personal CD and learn more about this great offer go here.

The Fed gives us a "once in a generation" 3/4 of a point rate cut, and sitting here at my desk at 600am Wednesday morning the S&P 500 seems a little unimpressed sitting at 1284.40, an area not much higher than it was when the rate cut happened. Other global stock markets are lower as well. As we know stock prices and interest rates do affect commodity prices, so let’s take a sector by sector view of things that I see in the coming months in the commodity stock, and interest rate markets.

Stock Index: "Buy when there is blood in the street" is an old saying, do this I have to add…"is there enough blood yet?" A 300 point drop in the S&P 500 since October is probably pretty close, however. I am looking much more for a market of stocks in the coming months much more than an overall recovery. Look for the broad indices to be choppy in general sideways pattern until spring/early summer.

Bonds/Notes/Eurodollars: How much more overbought can we really become here? Looking at the Sep 08 Eurodollar contract, it has rallied 245 points since October, and 51 points of that has come in the last two days! Going to the other end of curve, 30 year bonds have rallied 10 full points since October. Some stabilization on the equity markets should bring these over-cooked markets back down closer to earth, and be watchful as corrections here can be swift and severe. Look for another rate cut with the Fed meeting next week, and that could very well signal near term top in interest rates .

Currencies: McDonalds has a new commercial making sport of the US dollar’s weakness, things of this sort often are signs of a bottom, however continued interest rates cuts by the Fed will are not supportive to the dollar. For the next three months I am looking for choppy currency markets at best, with the Yen being a bullish exception.

Metals, precious and otherwise: I seem to be slowly painting myself into a corner here. So far I have been less than friendly towards stocks, downright bearish on bonds and mixed towards the currencies. So where can I put my money? Gold could stand to be benefactor here. In some ways it become a currency of last resort, and money looking for a home may very well continue into the yellow metal. Gold has held up remarkably well during this bear phase of the stock market which started in October.

Copper is also holding up well despite all the dark and gloomy economic news. As long as the market can hold 290.00 we should be able to stay out of trouble here. Global growth remains intact at least for now and that will provide support here.

Energies: Yes we did manage to trade over $100 a barrel (we actually did it twice, both for a very short period of time) Crude has tested key support at 85.00, and rallied sharply from theta level. Much like copper holding its support, as long as we see some stabilization in the equity markets, and crude can hold the 85.00 level, I would expect to see a trading range develop for before prices again begin to move higher.

Coffee, Sugar and Cocoa: Coffee looks like it is poised make to make a run. While Starbucks may not be recession proof, coffee demand usually remains strong despite of economic conditions. Coffee as not had the same big rise that we have seen in other commodities, and may look "cheap" by comparison and it may well find some trend trading, and fund money.

Sugar, which is also coming out of a bear phase, also looks like it should have further upside potential, especially if energy prices stay stable or move higher. I like the look of July sugar with upside towards 15.00.

Cocoa, on the other hand has enjoyed a bull run for the last four months, and may be due for a set back.

Grains are entering a time of year were they very often move is a sideways manner. Supplies remain tight with wheat and growing tighter in soybeans, which finally traded above 13.00 for the first time ever. Look for some choppiness here, but any weather problems coming into the spring will wake up a sleeping bull here quickly.

Livestock: Hogs. It is all about the hogs here and maybe the bellies too. Cheap hog prices and expensive corn is an equation that can’t work very well for very long. As we get past the winter doldrums, I am looking for hog prices to climb at an alarming rate. Cattle prices can be more sensitive to things like the stock market so I am looking for muted gains in live cattle, but feeder cattle should be ready for another leg up.

The great thing about commodity markets is that you can make money when prices go up, down and even when they go sideways. While I don’t think sideways is much of an option right now we should plenty of good trades in 2008.

Along with that these markets are going to be tough, and trying to go it alone can be the hardest thing of all. With conditions like this having a good coach and someone to help watch you back came make the difference between a good a year and bad year.

REPRODUCTION OR REBROADCAST OF ANY PORTION OF THIS INFORMATION IS STRICTLY PROHIBITED WITHOUT THE WRITTEN PERMISSION OF FUTURESONE AND STERLING J SMITH. THE INFORMATION REFLECTED HEREIN IS DERIVED FROM SOURCES BELIEVED TO BE RELIABLE; HOWEVER, THIS INFORMATION IS NOT ASSURED AS TO ITS ACCURACY OR COMPLETENESS. OPINIONS EXPRESSED ARE SUBJECT TO CHANGE WITHOUT NOTICE. THIS MATERIAL AND ANY VIEW EXPRESSED HEREIN ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED IN ANY WAY AS AN INDUCEMENT TO BUY OR SELL COMMODITY FUTURES OR OPTIONS CONTRACTS. FUTURESONE AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AFFILIATES MAY TAKE POSITIONS FOR THEIR OWN ACCOUNTS IN CONTRACTS REFERRED TO HEREIN. TRADING FUTURES INVOLVES RISK OF LOSS. DO NOT DUPLICATE.

This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way assured. No assurance of any kind is implied or possible where projections of future conditions are attempted.

Futures and options trading involve risk. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. In no event should the content of this market letter be construed as an express or an implied promise, assurance or implication by or from FuturesOne or Sterling J Smith that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance.

Sign up for you complimentary CD-ROM "Trading Commodity Futures". Brought to you by FuturesOne.

Sign up and get your complimentary educational seminar. This interactive CD-ROM introduces you to the fundamentals of futures trading. It lays out easy to follow trading examples along with additional resources to help today's commodity trader. This comprehensive educational CD-ROM was developed by the Chicago Mercantile Exchange and brought to you by FuturesOne. To get your complimentary personal CD and learn more about this great offer go here.