The dollar movement last week sparked a commodity selloff, highlighted by an oil pullback, grain plunge and several softs markets taking a nosedive. This week will offer much of the same as hurricane activity has not materialized as feared and the dollar continues to make moves higher.

Energies

What is holding oil up? Is it geopolitical issues, low inventories, weather, or none of the above? The truth of the matter is oil was getting some demand from strength in foreign currency against the dollar, and it was also getting some momentum by the euphoria that has come with the recent stock market surge. If the stock market rallies it implies a strengthening global economy which helps to support global oil demand forecasts. This, however, is a very slippery slope. Oil created a secondary high and fell as the dollar strength and stock market pullback brought attention to the fact that the supply side of oil is actually pretty bearish. More downside is expected here as my recent dollar forecast suggests significant gains in the dollar and pressure on the energy sector.

Financials

Stocks appeared to wane a bit this past week as the market takes some profits after a massive rally. If you recall I have been talking about the stock market's two steps forward and one step back price action and it looks like we are in for the one step back. Given the velocity and distance of the recent rally a move to 940 is not out of the question before a bullish turn. Bonds remain a buy heading into this S&P pullback. The dollar is of course a strong buy with the euro, pound and Canadian dollar likely to be beaten up during this rally. The yen is its own beast and while I remain bearish I acknowledge this market is not cooperating very well and is avoidable in the near term.

Grains

I am officially on the bear grain bandwagon and I have some nasty targets. Beans to $8.30, corn to $2.50 and wheat is a buy at current levels. Simply the supply picture is solid and global demand is going to be weak on a dollar rally. Surplus supply in several countries is likely to create a bearish market view, while China demand is the wild card as you cannot always believe what you hear out of there.

Meats

Declining grain input costs should continue to pressure cattle, while hogs may be bottoming. Look at Monday for a critical hog day as a positive close indicates a bullish turning point there, otherwise stay sidelined a bit longer.

Metals

Metals remain a short all the way as gold, silver and platinum are bearish on a dollar bull run, and copper and palladium take hits on a stock market pullback and economy fears.

Softs

Coffee is showing some serious volatility expansion and I am not confident that the breakout rally is here right this second. That being said I might look to sell short term strangles on a nearby up day. Cocoa remains bearish. Sugar, which brokeout on news of massive shortages ahead, is just as capable of going to 30 as it is to retrace to 18. I suggest avoiding futures or short options and a long strangle, even at current premiums, is recommended. Cotton remains a potential supply shortage buy on dips. OJ is going to take a hit from the lack of hurricane follow through, but I recommend buying the dip around 90. Buy the lumber pullback with straight January calls.

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.