Energies
War with Iran? Once a very a real possibility and now a few warning shots and we all go home for the weekend with no harm no foul! Nigerian attacks are heating up and helping this market hysteria based rally. $120? $150? $200? When traders start thinking like this they get caught with the blinders on. Look at some Dec. 70 puts on the cheap. A large bid came in mid-week on Auggie and Dec puts but the premium evaporated on Friday's rally, opening up a good opportunity to buy on value. Natural gas is riding the coattails of this crude move but with the backing of some pre-hurricane season short covering. It is a bit early to buying into the seasonal play for my tastes.

Financials
The S&P hit up against 1400 resistance but has a bullish pennant that it will likely breakout out of to the upside. However this choppy market is anything but bullish. Wait for the breakout and sell into it for a quick ride down to 1290. Bonds gave way to serious selling pressure ahead of this upcoming week's two day FOMC meeting with the expectation that the Fed may halt their rate cutting efforts. I am not sure how this month's data shows such a reversal in the Fed's strategy. You could argue the how low can they go theory but this market seems to me like it is getting a bit ahead of itself. Wait for 114 then buy some bull call spreads. The dollar began its turn to the upside this week as the failed euro breakout and bear inflation fueled ride in the yen was only supported by theories of a break by the Fed. The expectation for a quiet rally in the dollar is very dependant on the Fed's next move as a Fed rate cut halt could push the dollar higher in a hurry. The Canadian remains in a congestion pattern with a sell indicator on a break below 9680.

Grains
Weather issues put some pressure on soybeans this week as fears of a last minute rotation out of corn and into beans for some U.S. acreage affected by the rain has the volatility picking up in the grains once again. These price charts look ready to fall off the proverbial cliff, with a strong dollar helping to put action behind this recent pullback. Look for strong morning rallies to be reversed by day's end all this week as the selloff gets some confirmation.

Meats
Cattle is holding a supportive pattern but I cannot help but think this is a good entry to a short play on a break to 84. Hogs are catching a serious bid on a pickup in demand but I like a put play to see a solid 15-20% retracement in this market that doesn't look to be breaking out any time soon.

Metals
Gold gave way to selling amid a U.S. dollar rally, the first part of a huge liquidation I expect to see in coming weeks in this sector. If and when gold breaks 875 then watch out! Silver is just waiting in the wings with the whole sector susceptible to a dollar rally. For months gold ran up in a flat dollar environment, using crude oil and inflation as a crutch. Now the dollar is turning but gold can't hold up despite record oil prices. This change in sentiment is a good leading indicator that this market is far from finishing its retracement. Bear metals here we come!

Softs
Coffee is choppy as it reacts to fears of a solid Brazilian harvest and a strong dollar. Supply is not as solid as some analysts have stated and I like this entry level to a long play through frost season. Cocoa is riding high but showing some signs of losing steam as the recent rally does not appear capable of follow through. Sugar is pulling back and shows no signs of staging a rally anytime soon. Cotton is holding around a previous channel and I cannot help but think it is the only U.S. crop that offers a value play at these levels. Long cotton versus short beans (3 to 1 ratio on futures or use options to manage the risk) could pay dividends.



OJ volatility is through the roof on practically no volume. An impressive looking bottom on the daily chart is plagued by intraday price spikes on embarrassingly little volume. I am not biting on the technicals because of the light volume but I do like a drought and hurricane play in OJ after this 50% drop in price. I recommend long futures with put protection.

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.