Energies

Energy prices continued to run higher last week as surprising inventory drops and short covering were catalysts to this run through $70 in crude oil. My resistance target area around $75 is about to get tested and that means now is the time to develop short term bearish plays on oil and gas. The dollar is about to bounce and if and when it does there is likely to be a bear move in commodities.

Financials

A choppy stock market is whipping short term minded traders around while congesting above 900. This congestion is bullish but the gut says there will be a strong short term decline to test 900 before the market breaks back out to the upside. Bonds are no longer short term bearish but I would not trade this market to the upside so I recommended remaining on the sidelines. The dollar is in for a strong rally for the next two to three weeks (possibly a little bit of a late start this week). A little stock market weakness is all the dollar needs to gain momentum. Long strangles with a bull bias are recommended on the dollar. Bear put spreads in the euro and pound and straight put plays in the yen and Canadian dollar are also recommended.

Grains

Grains are likely in for a slide over the next two weeks as a strong dollar and lower oil prices pressure commodities to the downside. Beans are most susceptible to a strong move down, as corn and wheat remain somewhat supportive. The recommended inter-market grain spread from a few weeks ago may have some life left but I suggest walking away from that spectacular spread if you haven't already. Rice remains choppy and avoidable.

Meats

Cattle remains technically at a critical juncture and I continue to view the market the same as last week: 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. Hog congestion at these levels makes me want to exit any short with the intent of reentering on a break to fresh lows.



Metals

Metals prices finally began their price collapse as the dollar congests ahead of a bull move. Gold and silver are susceptible to massive price declines in coming weeks as both a commodity price decline (thereby reducing inflation fears) and a strong dollar make for a compelling long liquidation argument for the bulls. A failed test of the contract highs is also helping to pressure the market. Copper is still expected to hit 190 in short order and platinum is a strong sell at current prices. Palladium is a contrarian buy as auto sales overseas and a general demand bottom may have been hit.


Softs

Coffee is congesting above 125 support, however I cannot be a bull for a few weeks as the dollar bull run i anticiapate suggests a breakdown here in coffee to clear out the weak longs. Outside of a freeze I cannot see how coffee rallies during a strong dollar rally so I recommend standing aside for a few weeks. Cocoa is getting a bounce as a strike at a key port in the Ivory Coast remains in limbo, however I suspect this situation will die down and cocoa will begin a long term downtrend. Cotton remains long term bullish. Sugar is a buy on a dip near 1350-1400. OJ has gotten beaten up in recent weeks but long term calls near current levels is recommended. Lumber is still a buy to at least 250.

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.