Energies
A week that witnessed fresh all time highs in crude oil and a market with very few sellers ended with a lack of follow through from concerns of a tropical storm possibly heading to the western side of the Gulf. The storm ultimately was a non-event and could combine with Iranian President's Ahmadinejad's appearance at the UN's General Assembly in New York to deflate the energy sector and offer a sell-the-news effect. Crude has surged over 20% in a month and is likely to see profit taking and selling pressure coming into the market after being absent for weeks. Gasoline and heating oil have rallied in sympathy and should see a similar fate. This is the time to develop puts positions in this sector. Natural gas is choppy but has certainly suggested that the bottom is in for the near term and it is worth buying calls on dips.

Financials
The stock market surged on news of the Fed's decision to cut 50 basis points - a surprise by many analysts' standards. Instead of being concerned that this implied a much worse economic and housing outlook than would have been suggested by a lesser maneuver by the Fed, the market chose to see this as an assertive move to address a much overlooked housing problem. While the Fed has blundered throughout history they normally takes a conservative stance when it comes to inflation. If the Fed was willing to cut rates to help out the housing sector then they likely saw little reason for concern over short term inflationary implications that would come from making money more accessible. This would certainly be bullish. However, what the Fed did not do was tip its hat as to future cuts, which further develops the theory that we are in a period of market anxiety that will continue until the Fed lays out a clear path. Are we one and done or setting up for a series of cuts? Will housing stabilize or is the Fed just creating a calm before the storm? Will inflation hit the market like a boomerang coming back from the depths of dismissed Fed concern or remain stable during a period of flat economic growth? I am not sure the stock market will remain strong with these concerns lingering for months to come. Utilize the recent run-up in prices to develop long term bear plays in the S&P.

Bonds sold off following the announcement as the perception is that the ability for the Fed to continue to cut rates is muted by the concerns of economic conditions and inflation. The market hasn't a clue and the best approach is intelligent long strangles to play volatility which is likely to be a constant up until at least next month's Fed meeting and possibly beyond.

The dollar has broken through all conceivable support and is likely to test the depths in which it can fall before the European Union steps in to prevent a complete shutdown of their key export businesses. I would continue to buy long term call plays in the dollar and scale into them as the market falls, with a strong feeling that a fresh bottom support is not too far away. The Canadian dollar has zoomed to par with the U.S. dollar despite declining retail sales and a mediocre economic outlook. The basis for the price rally - the largest two week rally in its history - has been due to the rise in oil and metals prices (two key commodities produced by the country). This association is relative to the economic stability of the country and its currency, but does not suggest this move will continue much further. Short the Canadian aggressively with defined risk option plays and get at least a 300 point retracement out of the deal. The gut says that this may be a case of a breakout causing a true trend reversal (a spike high of sorts on a long term chart) and is worth a hard look for long term bear plays.

Grains
Corn rallied through critical resistance as the rise in crude oil prices lit the fuel under the ethanol fire to bring funds back into the market. It didn't take much with wheat and soybeans continuing to push the upper limits. Wheat quickly found support after falling from its contract highs and could easily be at fresh highs with news of continued growing export demand. Rice remains an impressive breakout buy.

Meats
Cattle prices continued to consolidate but should find selling pressure next week as the cattle on feed report came in above estimates. Hogs should also see additional selling pressure as inventory remains extremely high (even for heading into a seasonally high demand period). The quarterly pigs report next week could stabilize this market which is still going nowhere any time soon.

Metals
Gold remained strong following the Fed's move to cut rates (and deservingly so). After all, if gold is a true gauge of inflation then cutting rates implies a weak dollar and significantly increased risk of sparking inflation. Throw in record crude oil prices and long gold sounds quite logical. However, if you accept the argument, which I do, that the Fed cut rates because they were not concerned that it would greatly affect inflation then long gold becomes a sucker's play. If you take the side that says bonds tanked following the announcement because the Fed's move does not imply declining interest rates then you would want to be short gold. This is a market that broke out of a nearly half a year channel and set fresh all time contract highs, but neither of those two events suggest that it has to continue. Pull the longs and jump short the metals.

Softs
Coffee, my bull market of the year, finally began to surge on news that the Brazilian growing region is suffering from a potentially devastating drought. Forecasts offer little signs of relief ahead and Friday's selloff was more profit taking than fundamental logic. While I took (and recommend) taking some profits on this week's rally myself, it is likely just the beginning and long term bullish positions should continue to be scooped up on dips. Sugar began to show signs of life as anticipated, but next week is pivotal in the trend reversal in sugar. A bullish week sets up some serious upside potential; however play this market with calls as opposed to futures. Cotton remains bullish. Lumber is a buy. Cocoa has exploded to the upside as politics, disease and supply issues remain overwhelmingly bullish for this market. OJ rose slightly this week despite a lack of hurricane threats, as crop reports show Florida inventory is down 14% year over year and acreage is at 17 year lows. This is a good market to play a volatility pop in the near term.



James Mound is the head analyst for www.MoundReport.com, and author of the commodity book 7 Secrets. For a free email subscription to James Mound's Weekend Commodities Review and Trade of the Month, click here.