Energies
A choppy week of consolidation in energies focused on inventory numbers and a lack of continuation from the Israeli comments about Iran's nuclear ambitions. The energy report showed yet another shocking draw for crude but a build for distillates and gasoline (the focal point of the inventory reports for weeks to come). Technically oil is forming a wedge near the highs and expanding in intraday price volatility - for good reason. A market failure could offer catastrophic daily price moves that would ruin countless funds and speculators. Can the bull train pull out of the station and make its way to $150 or higher? Time will tell but long term put plays are still the right trade at these levels. Natural gas has gotten way out of control. These levels are Katrina-like prices and a good place for long condors.

Financials
Stocks rallied strong from fresh near term lows but lack the fundamental setup to rally substantially off of these levels. Sell bounces. Bonds may have set some fresh lows but will be tempered by a failing stock market. This market looks like its in a downtrending channel and could be played accordingly with a 2-3 basis point futures swing trade or a leg in strategy for a short strangle. The dollar broke key resistance at 74 but needs some quick follow-through to maintain any type of momentum. This market does not have me convinced but I remain a dollar bull with long term calls and a bearish outlook on European currencies. The yen plunge could be bought but be weary of the dollar taking over the currency sector and killing any technical support that may exist in the Yen. The Canadian dollar is right on key support above 8675 and could collapse on a close below that mark.

Grains
Lock limit up in the grains shutdown a lot of traders. The floor was in shambles in the aftermath and a lot of firms took a beating - a great example of why you should look at options over futures during market extremes. These markets have quite simply broken out. Look for a limit increase to signal a top, but otherwise stand clear or join the bulls for the short term ride. Rice remains a sell with puts.

Meats
Rising grain prices are pushing cattle through the roof. Hogs are turning off of topside resistance and remain bearish with a 15% retracement expected as this market lacks the fundamentals to breakthrough the top or the bottom of this long term range. Play bear put spreads in hogs and cattle out to Feb of '09.



Metals
The yen plunge is helping to fuel the metals selloff, and the dollar's recent breakout may help gold test 850. The bottom line is metals have a ways to fall but haven't broken just yet. Be patient and wait for the break below 850 in gold and maintain some long term gold puts. Take a look at some Dec. silver $12 puts or something along those lines for a volatility premium spike. Copper's fall from its $4 test is a good sign of a pending market failure. China demand could wane through the rest of the year and put pressure on copper to head to the 250 area.

Softs
Coffee's intense trading between 128 and 143 is extreme to say the least. How many markets have you seen that have 400-500 point daily moves but stay inside a 1500 point range for the better part of three months? The implied volatility is rising and showing signs of a major breakout. Brazilian harvest, frost season and a slew of other hanging issues read to me like a script for a breakout and run to 170. The market tendency has been to fakeout the bulls so buy a dip to 124 but keep a core long with bull call spreads at current levels.

Cocoa took a couple of stabs at 3000 and may breakthrough, but reversal is written all over this market at this price extreme. Put buying is recommended over multiple time frames. Cotton is catching a strong bid on extreme crop issues in West Texas and the lack of acreage suggests a major cotton rally may just be underway. Sugar caught a big rally on India shortfalls and Brazilian bug problems. Could sugar's extreme oversupply finally be in for a turn? The market should see a run to 12 in short order if this rally is in fact for real. OJ's pivot off key 50% price retracement has summer rally written all over it. Bull call spreads and straight call plays are recommended.

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.