The bull turn began last week and a critical rally in the euro on Monday should setup a big rally for the next two weeks. The election could create some interesting action, but will likely not have a trend like effect on the markets in the near term.

Energies

Lower than anticipated inventories has likely begun a shift in the trend in energies. Remember not only do we have OPEC cutting supplies but we also have a late start to winter which means a cold front could cause a spike in winter demand and turn this sector bullish in a hurry. Near term target for crude oil is $82. There is a bit of a call skew coming back into the market as specs and shorts begin to play calls over various time frames. This means straight call plays may not be the best value approach, although a strong rally makes it worthwhile. Look instead to a long calendar spread or bull spread for a solid bull option play.

Financials

The bottom did appear to be set last week as expected and this market momentum could carry the S&P to run up through resistance and break 1100 before month's end. Even though it is contrary to historic analyst opinion, that same volatility that tore this market down could very easily rally it back - even if only part of the way. Bonds gave back huge gains last week as stocks supported and is not the most tradable market at present. Look instead to spread trade long the 30yr. bond against a short nearer term maturity. The dollar, in my humble opinion, has topped in the near term. Despite accelerating its rally efforts beyond my targets this market has gone way too far too fast and is due to correct to the 82-84 area. This means a strong euro rally. However, Thursday's island key reversal pattern on a daily chart in the euro needs the market to support immediately to avoid turning ugly. Therefore look for a strong rally in the euro and pound on Monday and through the beginning of the week. The Canadian and Aussie dollars both caught a spike rally early this week as expected, but the bounce is likely to continue further this week.

Grains

A relative bottom is being setup in grains following a revision to the acreage numbers, which showed a 1-2% drop in acreage across the board. This will only gather some momentum if a general commodities rally ensues this month, which I suspect it will. Bull plays in wheat, beans and corn are recommended.

Meats

Cattle appears to have turned a corner as grains offered some price support this week. Look for a strong meat rally in coming weeks. Hogs, which are down nearly 30% since mid-August, are primed to rally as well.

Metals

Gold and silver bottomed out on Tuesday and look strong, however all these market sectors are dependant on the U.S. dollar pulling back in order for these supports to hold. This week is about as critical as they get in determining the intermediate trend, so all eyes on the dollar. Copper and platinum should support as well.

Softs

Ghana is forecasting a 3% rise in cocoa production, a good sign that the cycle shift is on in cocoa and lower prices are on the horizon. Coffee remains a screaming buy, having suffered from this commodity wide plunge despite supportive fundamentals. Rumors of a strong Vietnam harvest this month may be grossly over exaggerated and the country is exposed to heavy rains that are disrupting harvest. Cotton is getting beat up but remains a value buy at these levels with straight calls and futures with put protection. Sugar is likely to ride a corn and oil rally in coming weeks, offering a spike in call premiums. Lumber is a strong value buy with long term calls. OJ is congesting but at this point this market has retraced from 210 to the high 70s and has had little to no dead cat bounce effect during the selloff. This market is overdue for a strong spike rally and calls are the way to go.



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.