Choppy and volatile trade wreaks havoc on trend traders, but will set up a price expansion in most major market sectors over the next two weeks. I would consider covering short option premium strategies and taking advantage of Monday's possible dip in prices for a great entry into near-term long plays.

Energies

As crude breaks through $60, the market wonders where is the bottom? Inventory shifts, OPEC cuts, winter demand and a rise in travel should turn energies bullish. However this sector has a history of price trailing fundamental shifts and remains exposed to stock market selling.



Financials

Stock market weakness persisted and a fresh near-term low was set intraday before ultimately setting a record for an intraday price reversal with Thursday's rally. That momentum was partially diminished by a giveback of more than 50% of Thursday's impressive rally. The first half of the week will likely determine the trend for much of the rest of 2008 as a rally through Thursday's high will ignite a significant price breakout.

Bonds remain range-bound as a weak stock market pushed this market near its upper range. Expect a pullback on a stock market rally and continue to leg into premium collection strategies here.

The dollar is choppy and building a congestion pattern for a breakdown this week. Either way, price expansion in currencies is about to get reignited. The euro has a nice supportive technical pattern that needs some strength off of a likely Monday morning pullback to stay bullish, otherwise 1.2326 is critical support. The Canadian does appear to have had its rally efforts stalled, and I remain a long-term bear. However, I would recommend waiting for fresh lows before reentering short.

Grains

Grains remain in a congestion pattern dependant on its industry-wide correlation to determine its next price trend. However, there may be some divergence from this correlation in coming weeks as harvest numbers combine with critical demand information from China to create a potential rally in this sector. If hedge funds do not jump in over the next few weeks, this market sector may get caught in a winter downtrend - it's now or never so to speak. China bought a lot of beans from local farmers who couldn't unload the stuff. Keep an eye on this for indicators of China's potential demand for grains in the near future.

Meats

Cattle 2008 production numbers were a little under last month's numbers and could be a sign of shifting supplies, but is likely insignificant to the near-term trend. Hogs also saw a drop in production due to reduced slaughter this quarter. This should help to turn the tide in hogs and make this market go on a bull run through year end.

Metals

The metals sector experienced some strength amid a stock market selloff on Friday, but needs dollar weakness to ultimately turn the trend bullish. Gold breaking 770 will signal a technical breakout and bull move ahead for the entire sector.

Softs

A drop in mold-infested cocoa from Ivory Coast hitting the export market could help to bring prices lower in coming weeks. Coffee remains a strong value buy down at these levels. Sugar production in India is dropping considerably and a forecast for a possible sugar shortfall could turn this market bullish in a hurry. Remember, however, that this was a market with historic carryover inventory for two years and has a lot of sugar to run through before there is any type of global shortage. Cotton prices remain unbelievably low considering the reduced U.S. production and general trend away from cotton planted acreage. OJ is congesting near 80 and could explode higher off these prices in the short term. Buy some Jan. calls near the money and play the spike. Lumber remains a cycle value buy at these levels.

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.