Energies

This week the market congested despite a massive assault on Georgia from neighboring Russia. A cease fire in place over the weekend sets up a market collapse, especially if Russia pulls out and hurricane activity lays low in the Gulf. As mentioned last week, support at $105, $100 and $92 respectively on crude are less likely to be price supports than they are targets. Short the energies across the board on bounces, with puts of course.

Financials

The stock market remains choppy and volatile as the market inches higher amid a strengthening dollar and troubles abroad. This market is setting up a big fall, but is likely to rally for a little bit before it gives way to some serious downside volatility. Do not get caught with short put plays here as the volatility spike could wipe you out. Bonds continue to make a nice bull run despite a lack of fundamental logic behind the move. Foreign money is certainly helping to push it higher as global investors put their money back into U.S. dollars. This trend occurred not too long ago, and it sustained a rally in bonds that was historical. I am not convinced this is a long term trend this time around and would sell calls into the rally expecting resistance under 119. The dollar continues to fly high as expected and should see some pressure at 78, but ultimately this market is heading for my forecast of 80 before stalling for a bit ahead of the next wave of economic failures abroad. The Canadian is stalling on its recent plunge, but more downside is ahead. The pound and euro remain shorts but are near my short term targets.

Grains

So if all you shorts out there took last week's advice and grabbed your money to sit on the sidelines then good for you. This market came off the bottom in a hurry and is in no man's land now. Another stab at the lows may come, but there is too much upside risk to take a shot at it here. Wait another week, but don't get caught in what could be a bull trap. Bottom line is this market sector is no longer trending and there are better commodities patterns in other sectors to find opportunity. Too often grain traders get stuck trading grains when there are definitely times they shouldn't be. This is one of them.

Meats

The pop in grains did little to surge cattle prices as ultimately this market is at a topping point. Bear put spreads or straight put plays 10% out from the market are recommended. Hogs are still a short.

Metals

A big follow through broke silver this week as the market collapsed amid a rising dollar and falling gold market. These markets are still susceptible to further downside, both short term and long term. Take advantage of the recent pop in volatility to scale down on puts, but keep a few plays going to grab what could be another $80 down in gold as crude oil takes another plunge and the dollar makes a run at 80. The platinum collapse is nothing to be surprised about - this market ran up on a short term supply issue and a v-shaped reversal was in order. Look for a leveling off at 1200.

Softs

Coffee remained choppy as a strong dollar and solid supplies from Brazil holds the market back in the near term. Coffee is still a great long term bull play. Cocoa is tumbling below support and has a clear path to the 2200 area. Cotton crop data may have forced a pullback, but the lowest stocks-to-use ratio in 5 years is a good indicator that the market is susceptible to a spike rally in coming months. Get long in a hurry on this recent dip. OJ is setting up a bottom and using Fay as an excuse. Get long and forget about the weather. Sugar is below 1300 support and has little logic to its moves as it fades corn despite being fundamentally tied to it. With oil and corn falling sugar should be in the dog house, but it seems to be fighting the good fight - maybe there is more to this market than I am giving it credit for - wait and see on this one.



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.