Energies
Talks of OPEC possibly cutting production at the upcoming March 5th meeting, along with production issues in the North Sea and Africa helped to spike crude oil nearly $4 on Friday, reversing a several week downtrend. While many market players would suggest that a $4 rally on an OPEC cut is an overreaction, it is less about the cut and more about the psychology of the market and the industry. Let's not forget that OPEC may be a group of delegates from oil producing countries, but we are not talking about a nonprofit business here. These countries are getting rich on our thirst for black gold and are not forcing supply to bring prices down. They are pumping out massive amounts of oil to capitalize on current prices, and if a little PR gets them another $4 a barrel then so be it. The market hysteria is at such a level that we could easily see a run to $110 or even $120 a barrel, but that does not mean this market is bullish. Energy prices are t or approaching the top end of this very stretched out rubber band of a market, and the band is about to snap back in the opposite direction. A $4 surge means volatility is expanding, something that could bring this market back down just as fast as it ran up. Heating oil continues to offer a good short against rbob (1 to 1 ratio). Natural gas is stuck between $7 and $8.50 and long strangles are recommended.

Financials
Stocks offered some end of the week price support after plummeting earlier in the week on fears of recession, inflation and an unpredictable Fed. This market remains bearish with continued choppy trade expected. Sell premium on large one day price moves. Bonds have likely set the high and should see 116 shortly.

The dollar spiked as the European Union did not cut rates but the U.K. did and fears that European countries are getting way too far behind the curve caused weakness in those currencies against the dollar. Expect a choppy but strong dollar rally in the months to come. The Canadian dollar remains an enigma as independent economic strength remains and technical support around par is holding. Wait for a break to fresh near term lows before getting short, otherwise this market may have something left in its tank. Long term the Canadian dollar is setting up a major price retracement, but it is difficult to stand in the way of this up and coming (and I get choked up saying this) economic powerhouse. The Japanese yen looks ready to turn, having benefited from the carry trade (bringing investors back to the yen), the market appears to have a technical top in place with a strong U.S. dollar to help spur a selloff in the yen in coming weeks.

Grains
Dynamic volatility and market hysteria has all but engulfed the grain sector as a major wheat shortage has the market seeing all time highs in lock limit fashion. The wheat market is about to expand limits, likely raising margin and signaling the beginning of the end for this historic run. Get bearish grains now and get ahead of what will likely be a very steep vertical curve offering a v-shaped reversal. Surpisingly, despite a string of lock limit days in wheat, France announced a strong production year ahead in 2008. China just simply controls these grain markets, and funds are getting way too greedy. One noticeable change in commodities over the past several years has been the impact of funds on volatility and price trends. Within that change it is clear that price moves are stretching farther than they have in the past and whipping back harder than ever before. These grains are overextended and you don't need an analyst to tell you the obvious. Be smart and buy some long term puts. History shows us these moves end with a bang and often times there is more money to be made on the downside then there was to make on the upside. Rice made the move I was looking for over the entire course of 2008 in about 5 weeks, so it is time to turn on this market buy some puts ahead of a major correction.

Meats
Hogs have surfaced in the news quite a bit lately as supply issues abound. Blue ear disease and rising grain prices have pushed prices higher. China, a major source of global demand, has had a severe winter which has inhibited deliveries and caused the country to tap into its pork reserves - I know, I took a double take on that too the first time I heard it. China apparently has an emergency reserve for pork during supply emergencies. This market hit a critical bottom but is now mid-range and is not offering a clear trade. Sell around 75 and buy around 55 until the market breaks out of the long term congestion.

Declines in Australian beef exports from rising supply from the U.S. to Asian countries is a sign that this market may finally be ready to give up on these long standing extreme prices. This may coincide perfectly with the top in grains which had previously helped to support beef prices because of high feed prices. Stock up on straight puts.

Metals
Gold and silver surged back this week with a vengeance despite a U.S. dollar rally. The correlation between gold and the U.S. a simple one - gold is priced in U.S. dollars so as the dollar rises gold becomes more expensive to foreign buyers because they have to make up for the drop in value of their currency. However, this does not prevent gold from rallying if other forces are pushing it higher. Fears of recession along with what some see as aggressive rate cutting by the Fed, which may spark inflation, combines with a declining stock market to create a flight to quality in gold. However, if the U.S. dollar continues to gain ground then that correlation will ultimately take hold of the gold market and send demand into a tailspin. This will ultimately break the metals and take surging markets like platinum and silver with it. Copper inventories are down as China demand picks up because of weather forcing production issues. Platinum is on a lightning pace to $2,000 because of power issues in the world's largest producing platinum nation, South Africa.

Softs
Coffee has broken out above recent highs and is seeing some short covering rallies amid a global commodity run. Overall this market is beginning to shows signs of a more vertical pattern than what we have seen in recent years, suggesting the market is about to get volatile on its road to $2.

Cocoa is holding near its contract highs as dry weather in the main growing regions of Ivory Coast and Ghana have created the perfect storm with the political turmoil wreaking havoc on exports and production. This market really has unlimited upside but the gut says stocking up on some puts may payout in the long run.

Cotton stayed congested through the week's end but is on the brink of price breakout and is worth a long strangle to play the expansion in volatility that is to come. Otherwise buy some straight long calls - July 80s?

OJ broke below key support at 132 but the ugly chart pattern is unlikely to hold, suggesting that scooping up some futures at this value may be a worthwhile risk for the reward of being long heading into the hurricane season. Ideally you would want to do this around May, but the seasonality trend is forcing the entry a bit earlier.

Sugar skyrocketed on Friday as news of a major sugar plantation in Georgia exploded, leaving wreckage in its wake. Throw in a $4 crude oil bounce and questionable India supply numbers and this market is looking pretty bullish. The gut says we break through 13.10 and then collapse back to 11.50 or so.

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.