Energies
Two consecutive weeks of shocking inventory reports fueled this sector to significant fresh highs. The U.S. thinks three times is a charm as we push for a third round of sanctions against Iran. The only reason crude didn't hit $100 this week was the Fed's comments on Wednesday regarding concerns that energy prices, amongst other commodities, were putting pressure on the economy and sparking renewed inflation worries. Were the Fed's words just commentary or the beginning of the U.S. government's efforts to thwart skyrocketing energy prices. Rates for transcontinental cargo shipments on freighters are ballooning to levels that have forced several countries to reduce imports citing rising transportation costs. Many analysts, me included, see an immediate impact on the world economy at these inflated prices, and it will not take long before the demand drop is seen in the weekly inventory reports. Selling call premium is extremely aggressive but offers some incredible premiums not seen in the history of the crude oil market. Look at January 110 calls and use the premium to buy some bear put spreads out to February or March expiration. Natural gas call premiums have begun to spike as anticipated and I recommend taking the premium soon and running for the exits with the profits.

Financials
The stock market continued its choppy and volatile downward spiral this week as it set a secondary top and redeveloped bearish momentum heading into next week. Strong GDP and a positive employment report were offset by the Fed's words of concern over inflation, rising commodity prices and a real estate market meltdown. Throw in a banking crisis and less than stellar earnings and you have a got a recipe for disaster.

Bonds sold off as the Fed surprised many by cutting a quarter point but implying a one and done attitude as inflation fears balance the need to bail out the banks and the real estate market. The 30 year was right on the topside of a long term channel and Friday's surge off of a supportive employment report may just have confirmed my pre-FOMC meeting forecast, suggesting a clear ride to 116. Sell put premium on dips.

The dollar continues to penetrate fresh lows as gold and crude oil set impressive new highs. I remain a long term bull seeing any dips as dollar average entry points into futures and calls (or puts in the pound and euro). The Canadian dollar surged to additional highs against the dollar as their employment report showed an unexpected spike in jobs and an economy on the rise. Using historical price action versus time indicators, I would venture to say that the recent surge in the Canadian dollar far exceeds the overbought condition in crude oil or any other market for that matter.

Grains
Corn and soybeans continued their divergence from wheat as strong technicals persisted in both markets. Wheat, however, is seeing weakness as Russian exports spike ahead of their implementation of wheat and barley duties on November 12th. Additionally, Egypt and Italy cancelled large wheat orders further suggesting a fundamental and technical top in this market has been set.

Will wheat bring down the rest of the grain sector? As a substitutive commodity it certainly will temper corn and bean price surges, but overall this market could correct another 20% while corn and beans maintain strong technical outlooks.

Rice remains a breakout buy as November first notice deliveries are showing the true demand for this forgotten grain and spiking the market - it appears that this could be just the beginning despite several historical tops near current prices. This market could be in for an epic ride.

Meats
Cattle prices continue to tumble amid failing technicals, but be aware of the longer term support at current levels. Let me preface this by saying that I am a perma-bear in this market waiting for the eventual collapse of this industry that has sustained an incredible profit and price structure for years. That being said, this market is at trend line support of a critical weekly pennant and, until it breaks below 92.60, I would avoid mortgaging the farm to bet on the breakdown. However, if I had some cows waiting to go to slaughter, I might be inclined to do it sooner rather than later.



Hog prices have melted down through my key buying area, but using calls in place of futures allows you to dollar average in here as the oversold conditions are likely to end rather quickly. Buy, buy, buy.

Metals
Gold spiked on the close on Friday after setting a false intraday top just above $800 an ounce. This market has all the correlated fundamental reasons to rally - surging crude oil prices, general commodity price inflation, a weak dollar and Fed concerns over inflation. A flattening of the dollar and eventual rally, along with an anticipated top in crude sets up a top in gold - I do not feel it is a matter of if but rather when and continue to recommend long term scale in put positions in gold and silver and ratio call credit spreads to collect premium on spiking call valuations. Copper is far off from $4 now but still offers great bear plays as it comes off of these historical extremes. Platinum remains a sell at these prices.

Softs
Coffee has found supportive fundamentals as Robusta prices continue to rise on larger than anticipated rejections of Vietnamese supply and a delay in bringing coffee to market in Vietnam due to sustained heavy rain. According to the ICO 88% of the rejected coffee in the world from 10/2006 to 3/2007 came from Vietnam, a 19% increase over the previous six month period. This market got caught in a fund liquidation when rainfall ended the drought fears in Brazil and flowering for the 2008 crop year spooked specs out of the market. This offers long term bulls, like me, to enter the market with bull call spreads on the cheap and scoop up some futures at a great entry price.

Cotton is seeing choppiness as it comes off of several years of depressed prices. Cotton remains technically bullish during a period in which Brazil stages a coup through the WTO on the U.S.'s cotton subsidies. Buy calls on dips.

Cocoa volatility is expanding as it sets up a retest of recent highs, and I suspect that fresh highs will occur shortly following the market's realization that recent supplies brought to Ivory Coast ports will be short lived.

OJ is weak to say the least following a more than 13% pullback off the highs set after the recent crop report showed lower than anticipated yield. Cover that premium we talked about collecting as the vol premium in this market has all but evaporated. Scoop up some long calls and play an unexpected surge heading into the holidays.

Sugar has established a short term weak technical structure following a double top high at 10.50. Bear in mind that this market has yet to offer a true dead cat bounce or price retracement after collapsing from historic highs nearly double current prices. Calls remain dirt cheap here and I would look to July options to capitalize on the virtually zero time premium in these call options.

Following long term cycle theory in lumber often means jumping in with both feet when everything fundamentally and technically is screaming to go the other way. This market has such a solid history of being a buy between 200 and 250 and being a sell at 400 that developing positions down here is just about the definition of value buying in commodities.

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.