Energies

Rising gasoline stockpiles and a call for a release of 10% of the Strategic Petroleum Reserves (SPR) helped to avoid a snapback effect from the recent oil pullback. Despite the fact that this bill will likely never come to fruition, the simple act of the government attempting to alleviate price pressure in oil should cause a psychological give-up of some of the excessive premiums built into the market. Rising supplies in gasoline are key during the summer months, and enough time has gone by at sustained high prices to cut back on demand. I see major fallout in oil prices forcing a commodities retracement in coming months, a much needed global relief that should put the bulls in check (see www.moundreport.com featured articles for the Mid Year Review and Outlook for more information). Natural gas took it on the chin as supplies are stronger than expected and the market gave up on its oil piggy back ride.

Financials

Stocks supported above 1200 in what could be perceived as a political and PR push for strength amid a banking sector collapse. What else would you expect when you can't short a market? Let's see do I buy it or do I buy it? The stock market has always been structured in a way that establishes a buy and hold mentality, so I suppose logic would suggest when confidence disappears they just put in rules to stop you from making it go down - and people wonder why we are futures traders! Now the government wants to control the CFTC rulebook and kill the last remaining free market (or as close as we are going to get). Sell the market up at 1320 if gets there, otherwise it might only give you a shot at some puts with the market around 1270.

Bonds remain bearish to 112 but generally range bound until a clear Fed interest rate policy path is established. Everyone knows they want to hike, but the question is will they? The dollar is gaining support as commodity inflation gauges like oil and grains take it on the chin, and I expect this to continue to push the dollar through 74. A break and close above 7450 puts the dollar on a path to 80 and the euro, pound and Canadian in breakdown mode.

Grains

Corn has rallied 10% off the lows set earlier in the week, suggesting a spike low bottom. I am not a believer despite the market psychology being bullish supported by the market holding just above a lock limit down intraday earlier in the week. Sell corn anywhere between 6.10-6.40 and look for a second leg down to about 4.80. Soybeans are getting a late start to this selloff and are most susceptible to a complete failure if corn breaks the lows. Wheat seems supportive here as a good winter crop can only do just so much to break this bull market. It is unlikely wheat will hold up if corn sets fresh lows, but I would focus my bearish outlook on corn, beans and rice.



Meats

Cattle continues to rely on grain price movement to determine its trend. Hogs could experience some selling pressure as unexpected strength in supplies in China may reduce global export demand.

Metals

Gold and silver, and the metals complex in general, have held up despite a big drop in oil prices, support in the stock market and the dollar. I have seen this many times before in the metals. The market participants simply don't believe that what they are seeing in the other markets are true trend changes. They are late to the party because they do not believe the party will last very long. If the dollar breaks 7450 or the oil market breaks to 110 then they will have little choice but to play catch up and watch an epic metals meltdown. Get short ahead of the action.

Softs

Coffee is getting beat up by strong supplies from Brazil and a solid 08/09 forecast for continued strength in supplies. This is a market on a clear long term trend line support and the dips should be bought. Cocoa is holding on to these historic highs despite a better than expected Ivory Coast mid-crop and the outlook for better harvest numbers ahead. Historically the net harvest in cocoa suffers because farmers cannot buy necessary pesticides. When prices are this high I would not be surprised to see better end numbers for years to come as the practice of pesticides becomes the norm. Cotton is likely to see a rise from a crop hurting hurricane Dolly and a general poor net number based on lower planted acreage. Buy this dip and play a move to 82 or higher. OJ is a buy on this dip with long term calls. Sugar is going to see a big selloff if corn prices break to fresh lows. Sugar is susceptible to a move to 950 or lower.

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.