Last week's Mid-Year Review and Outlook discussed some important elements to the second half of 2009. The key element, which has been a major theme for several months, is the U.S. dollar. This week expect the dollar to reverse its current downtrend and offer an impressive move higher amid a metals meltdown and commodity slamdown. Timing is everything in this business and you can't be afraid to call'em like you see'em and this week appears to be the turning point for the commodity markets based on my analysis. In addition to the dollar move I see a volatiltiy explosion happening this week in commodities so buckle up!

Only about 15% of named storms have occurred in June and July, so look for August to bring into focus some potential weather concerns for markets like OJ, cotton and oil. A number of soft markets have experienced intraday volatility spikes lately and many attribute it to summertime low volume activity. I would not be surprised if fund buying is a big part ofwhat we are seeing, as markets like sugar and cocoa continue to see outside interest.

Energies

Oil rebounded last week but I suspect it is about to take a hit from a rising dollar and lack of hurricane or weather related concerns. Expect major pullbacks in oil, natural gas, rbob and heating oil this week. Oil topping below $70 is critical to seeing a swift downturn.

Financials

As the S&P breaks to new near term highs it is clear we are in a bull market. This breakout in the stock market had lifted commodity prices this past week, but that is likely a shortlived correlation as the dollar takes a run higher. Bonds remain choppy and continue to offer premium collection opportunities. I expect the strong dollar rally to pressure the euro, pound, yen and peso. The Canadian dollar is on a strong breakout, but resistance is expected between 9310-9350.

Grains

Corn and wheat appear to have turned bullish after getting pounded for weeks. I see a great opportunity to play long corn and wheat against a short soybean. Corn had penetrated support but overall should see buying above $3. Wheat seems to be congesting during a period of expanding intraday volatility, offering a good intermediate term bull call spread opportunity. Look at scooping up some rice puts.

Meats

Cattle declined last week and is coming up on trend line support, but overall this market has no trend worth playing. Hogs continue to collapse towards the recent lows and I expect prices in the upper 40s sooner than you think.


Metals

Gold spent the week in a very tight range, setting up a clear technical expansion this week. The gut says the dollar breaks out and sends gold and silver unexpectedly south for the week and beyond. Gold and silver puts are recommended. Copper remains a global economic rebound play. Platinum is a strong sell. Palladium is an auto industry comeback buy.

Softs

Coffee got slammed on an bearish industry supply outlook, but overall the market showed tremendous resilience and recouped quickly to fresh highs. I think coffee tests 118 this week but after the dollar push the market should be free to run through 140. Cocoa needs to hold under 3020 to develop a secondary long term top here. This is a great entry spot for put plays. Cotton remains a buy on this dip. OJ could retrace a bit but I still consider dips a value entry. Sugar broke through topside resistance and the market is taking off but I think it is a headfake and would be buying puts on this move. Lumber remains a buy.

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.