Energies
A surprise drop in inventories helped to further crude's recent historic run. I remain bearish this sector (natural gas excluded) and see bounces like this as an opportunity to sell deep out of the money calls and scoop up bear put spreads. We are post-hurricane and pre-cold weather, which creates a one month pocket for a major retracement in energies that could continue as long as the weather holds out.

Financials
Stocks offered a choppy rally to fresh highs this week as solid retail sales help bolster this resilient market. Bear put spreads are recommended as this market has too many issues that will come to the forefront that will turn it bearish in a flash. Bonds are choppy but remain bearish as the realization that the Fed has no plan should this recent rally from last month's rate cut pause. The dollar remains weak but I suspect a bull run is right around the corner. Look for the EU to step in shortly and scoop up some dirt cheap dollar calls or euro puts to play the move. The Canadian dollar is on the longest sustained run in decades and has yet to retrace any significant amount of its over 50% rally. Short futures with calls as protection.

Grains
A broad-based bullish report for grains this Friday helped to stabilize corn and offered a sell-the-news effect in wheat. Beans remain bullish but pulled back off the report. Corn is interesting in that the yield issue we have been discussing for months finally came to the forefront. The late plantings greatly hurt the yield but was partially offset by declines in the demand forecast for corn in ethanol production and for feed use (bogus). Dodge wheat but scoop up corn and beans on dips. The rice market is the place to be as it will benefit most from the upcoming China shortage crisis.

Meats
The U.S. has basically given up in its talks to expand its beef export relationship with South Korea. Britain discovered its first ever case of bluetongue disease which can lay dormant in cows. Technically, cattle looks very bearish after breaking down from a perfect head and shoulders top. The current bounce should see technical resistance just above 98 and the market is a strong sell. Hogs are collapsing and have finally broken out of its extended consolidation - almost. Wait for a break below 55 to accept a bearish view here, and the gut says you should stand in front of this tumbling market and buy some calls for a quick bounce.

Metals
Gold and silver continued to chop around their recent highs as the dollar tests its lows. However, the upcoming stabilization of the dollar could set up a historic metals meltdown. Throw in a potential China demand drop due to its rising interest rates (to slow growth) and markets like copper could help to break this sector down. Supply issues in South Africa have helped to support platinum prices but this is short lived and worthy of a short, albeit risky.

Softs
Coffee remains a focal point for specs, including myself, as spiking growth in Brazilian exports (thought to be the best 12-month export period in recent history) shows a high demand market with potential crop problems setting up a supply/demand imbalance. Volatility is extremely high, but could get even higher as the market is seeing intraday shakeouts and bull rallies with a potential for a supply squeeze in this market.

Cocoa is finding some price support after a significant retracement due to post-harvest supplies in the Ivory Coast being brought to port at a faster clip than anticipated. If you take a step back and look at the big picture, the Ivory Coast crop is probably as bad as once thought, but a slew of farmers are jumping at the chance to sell their freshly harvested cocoa at some of the best prices they have ever seen. Let the quick-to-bail unload their crop and then you will be left with a supply problem that could be historic. The forecast for a strong Ghana crop year in '08 is more than offset by weather related issues in Indonesia hurting their supply forecasts.

OJ had a week of volatility not seen since the '05 hurricanes, as pre-report action caused a fresh intraday spike and failure before Friday's report confirmed the juice yield from the Florida crop was below estimates. The market is not going back to $2 on a 3% drop in yield, but it may help form a bottom in a market setup for a multi-year sustained rally.

Cotton has begun to redevelop price support after choppy trade set this market back from a recent attempt at rallying. This is a market that has clearly set a bottom and is a cyclical buy. Scoop up the dips here.

Sugar got some bearish news this week as the EU did not cut back on their plantings for the upcoming season. This was not as bearish as it seemed. First, the WTO restricts the EU from exceeding certain export volume, so additional supply would not necessarily be felt on a global level (besides, the EU runs at a surplus because it exports sugar). Second, the euro is at extreme all-time highs, making exports a difficult issue. Third, the EU cited a balanced supply/demand outlook as the basis for the decision, suggesting that the market could be exposed to future supply issues. Last, but not least, supply is the known element of this market; we have too much sugar. However, demand is increasing and the low prices will drive farmers into other commodities or to shut down altogether due to lack of profits or subsidies.

Lumber's break below 240 brings it into a critical price zone between 240 and 180, an area it rarely sits at for too long before rallying. Has the building crisis bottomed? Scooping up some dirt cheap calls here may be worth the risk.

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.