Energies

Crude oil is likely to breakout to the upside this week as it retests recent highs. The market had congested then failed, and in a matter of days is back at the highs. This is a bullish market indicator. Bull call spreads recommended. RBOB gas and heating oil should follow suit, although gas demand is bearish, making it a less attractive energy play. Natural gas is a value buy with calls that are capable of a strong volatility pop. Look at some deep out of the money call plays for December.



Financials

Stock strength sets up a solid bull run through week's end, as I anticipate a run through 900 on the S&P by the end of April. Bonds remain choppy and are a premium collectors dream of late, offering a high return for what remains a high risk. Continue to fade moves by legging into short strangles. The ECB went under forecasts for a half basis point cut and only cut a quarter, making many analysts question whether they are playing passive to the U.S. aggressiveness. After all if the U.S. funds the world's bailout then why chip in? I am not sure that is the reality of the situation, and I think soon we will see the U.K. and others follow the U.S. with treasury buybacks and a currency dilution of their own. The euro is at a critical juncture as the 1.3740 high will determine the trend in the euro for months to come. A thorough break, say a close above 1.3820, would indicate a long term congestion pattern in the dollar and euro and a move to 144 in the euro. A failure here would mean an aggressive return to fresh highs in the dollar a fast path to 120 in the euro. The next week or two is absolutely critical in determining the true direction of the dollar. The yen continues to fall and I expect another 5% downside potential in the near term. The peso found support where there was no historical relevance. I expect a fast decline in the peso starting this week. Short with stops above 78.

Grains

Grains took off after a quasi bullish prospective plantings report. I suspect this is the beginning of a nice run for grains in the short term and I would not stand in the way of this action. The WASDE and crop production reports this week should further the move.

Meats

The grain rally and general commodities rally should help to boost cattle and hog prices, making this sector a near term buy. The quarterly hogs and pigs report was short term bearish and long term bullish in my opinion but overall the supply picture is far less important as the demand that will come from an improving global economic outlook.

Metals

Gold is setting up a major collapse after failing off its retest of the highs. The IMF is likely to sell some gold on the open market and India hasn't bought anything in a while. This market is super inflated on economic fears that are waning. Look for the plunge this month and as early as right now. Silver appears even more susceptible. Copper continues to impress and is the only bullish play in the metals sector.

Softs

Recent reports of early rains in Vietnam causing flowering are, in my humble opinion, highly over exaggerated. An early bloom is bearish for yield but the real problem will not be some early rain in the Vietnam growing regions. The bull play in coffee for 2009 is based on a big dip in supply and solid demand. Cocoa is testing upside resistance and is benefiting from a strong commodities run. I am torn a bit here as the commodity run is likely to continue for a time as the stock market recovers, but my gut says cocoa will fail. Simply, the fundamentals are not there for a sustained rally to fresh highs. The IMF gave Ivory Coast $3 billion which is likely to help create a more stable environment and greater supply. December puts are recommended. Cotton is very bullish and should track alongside grains in the beginning of what could be an epic price move in coming months. OJ is weak in its uptrend but overall is a strong value buy for 2009 and beyond. Sugar is very choppy and a long strangle is recommended here. Lumber remains a strong cyclical buy as it is gaining momentum from a strong stock market and a turn in economic momentum.

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.