Energies

Oil prices continued its mass fund liquidation, seeing prices tumble as the dollar marched higher. Prices continued to fall despite a massive 1.5 million barrel supply cut by OPEC, illustrating the sector's exposure to the rise in the U.S. dollar. A turn in the dollar, expected this week, should spike oil prices and there is an opportunity to grab a $20 move with some bull call spreads or straight deep out of the money calls. Natural gas is nasty right now and I would tread lightly getting into that market. Focus on oil and rbob.

Financials

It is a scary time in the stock market right now but the gut says its over to the downside and a big rally will take place next week. Sell OTM near term put premium and buy some calls. Bonds are all over the map but should retrace some of this week's move next week, indicated by the strong tail set by Friday's spike high on the limit down move in the S&P in the AM. The dollar is on a much more vertical ride than even I, the seemingly lone dollar bull this year, could have anticipated. I expect a strong retracement next week and to see the dollar index back in the 82 area come year end. The euro and pound are buys but expect strong price spikes in the Aussie dollar and Canadian dollar despite their long term bearish outlooks. Short term these two currencies have fallen way too far too fast and this week ahead should be a bounce back week for them.



Grains

Strong selling in grains made me do a double take on some of the pricing going on right now - $8 beans, $5 wheat and $3 corn makes you want to look back at when these markets really broke and it has just been a short month or so of selling to see these epic price highs crumble. This is an important week for the grain sector to establish a V-shaped bottom and take off, otherwise this could be a congestion winter ahead. I expect a strong rally across the board but look for this upcoming week as an indicator.

Metals

So much for a flight to quality in gold as the plunge on the dollar rally continued. Look for a reversal this next week and an unexpected historic price spike in metals. When I say historic I mean this volatility and chart pattern screams $100 up day in gold and lock limit in silver. With that kind of potential upside volatility take some deep out of the money intermediate term straight call plays for the next couple of weeks to play the volatility spike. Copper is sub-$2 and is reminding traders of where we were pre-metals run. Short term price spike aside this market is heading to 120.

Softs

Cocoa broke 2000 as expected but more downside in the short term is unlikely as a strike and crop issues remain in the Ivory Coast. Expect some congestion and a bounce back to 2300 before ultimately breaking to 1500 by March. Coffee is taking the fall with the rest of the industry but is an incredible value buy. OJ is also due for a correction to 105 or higher. Cotton is all over the map with heavy one sided volatile one day swings with relatively little meaning behind them. Buy the dips at this value level. Sugar is avoidable and lumber is a long term buy and hold.

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.