Energies

Energy prices continue to soar as a lagging reaction to sustained economic recovery, or at least the idea of sustained economic recovery. Oil prices have broken well outside previous resistance ahead of summer driving and hurricane seasons, showing strong short covering and a clear bullish tone. In essence this move has spurred much of the commodity rally we have seen in recent weeks. So what's the big to do? Simply, the U.S. dollar is getting slammed and foreign demand is spiking. General confidence over a global economic recovery combined with a cheap dollar means countires are spending money and the U.S. government is all about letting it happen. This trend is unlikely to continue for more than a couple of weeks and therefore I expect limited upside in energies moving forward and a great put play either this week or next week if prices test $75 on front month crude. Natural gas is also showing a great put play opportunity slightly above current levels.

Financials

Stocks broke trhough congestive resistance and remain a strong buy despite a lack of volatility. The market is resilient and I have good memories of this type of one step back, two step forward trading that we are seeing. That means don't get greedy but grab your 50 points on the S&P and wait for the pullback, buying on the dips. Bonds remain weak as a strong stock market and faster than anticipated economic recovery beg for rising interest rates. This trend went a little too far too fast but 112 is not out of the question before we see a bounceback on the 30 year. The dollar's slide was expected but I highly recommend that you not convince yourself this is a long term trend. This relief from dollar strength was needed but it is shortlived in my opinion and I recommend a sell on the euro, British pound, Canadian dollar, Mexican peso and Japanese yen.

Grains

I am always fascinated by the trading action in grains this time of year as everyone tries to get ahead of the weather and every farmer seems to feel their crop conditions represents the entire country's situation. Technicals are thrown out the window and fundamentals are about as fluctuating as any market you will find. In the end, however, this rally is supported by a weak dollar and strong oil market and both of those things are nearing an end. That means sell grains as early as this week and play the pullback, even if it is just for a few weeks. Rice finally picked up some buying interest and may have set a bottom even with a grain pullback ahead. I would play wait and see there and let the next couple of weeks go buy before buying in.

Meats

Cattle is technically at a critical juncture. There is actually a contrarian buy play here for the short term with stops below the recent lows. If the lows are thoroughly penetrated on a closing basis then I would have no choice but to reverse and watch this thing collapse after years of strength. The gut says there is an unexpected rally this week and a worthwhile long futures play here. Hogs continue to fall apart as expected and there is no end in sight.



Metals

Metals continue to defy my expectations of a price collapse as the dollar remains weak. This trend appears to be nearing its end. Gold and silver remain underneath their respective contract highs and I see this being an even better short than before. Bear put spreads are recommended in gold and silver. Straight puts are recommended in copper with an aggressive 190 target by the end of July.

Softs

Coffee exploded to the upside as bean infestations in India, a weak dollar and general short covering all have pushed this market through critical resistance. The dollar's surge late in the week sucked out the weak longs and now is a great time to jump into the market with support above 125. I expect a shot at 150 before month's end. Cocoa should remain choppy and I expect a severe bearish turn near the end of the month and a push below 2000. Cotton is a buy on dips. Sugar may continue to expand in volatility and remains a buy on dips. Lumber broke out through resistance and is a strong buy. OJ is officially in an uptrend, with great seasonal and fundamental support for further upside. I have a 120 target by August.

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.