Continued selling in the stock market has helped spawn a breakout US dollar rally and pressure commodity prices further. Winter storms or not, the oil sector took a nosedive on what should be perceived as both U.S. and global economic weakness - something I forecasted and continue to anticipate throughout much of 2010. The question heading into next week is whether the market will stabilize and the short answer opinion is no. Of course rarely, if ever, does any market move in a straight line, however I do not believe this is a slide but rather a crash just starting to gain momentum. Market sentiment still has room to become more bearish and the dollar has a lot of technical room to rally further. The Superbowl will likely have the only Saint the stock and commodity markets will see for some time as a winter collapse continues.

Energies

Velocity of decline is important to what the oil market experienced last week. It has been quite some time since $3 moves became commonplace in this market and it is a sign that the market is getting very bearish very quickly. It is also an indicator that the intraday bounces could offer shocking volatility but not necessarily be a real indicator of a bullish reversal. The larger the plunge the more impressive the upside fake-outs tend to be. That being said, use the bounces as entries for bear put spreads. Natural gas remains a solid long against a short crude or heating oil and I continue to recommend long rbob against a short heating oil as inventory problems likely lay ahead for rbob come May.

Financials

Stocks continued to thwart any bull attempts to stabilize this collapse, and in my opinion traders haven't even seen the real collapse yet. It is time to get out of the way if you are a bull and jump on this short wagon. Put premiums have bounced on an expanding VIX but remain a relative value in my view due to the potential for more expansive downside moves in the near future. The VIX tends to shrink on two consecutive flat to up trading days so use that as a good straight put buying or synthetic short entry opportunity. Bonds remain a buy on dips. The dollar exploded to fresh near term highs and is on the path higher that I have been preaching for months.

For some of you that have followed my report for some time, you might notice what appears to be a bearish Mound Ladle Formationtm in the dollar, but in fact it is not a rounded bottom which is a defining characteristic. Instead you are looking at a strong v-shaped rally (meaning more vertical on the rally than the selloff part of the V) which is about to approach resistance just below 82, but may have the momentum to continue on through that point in a very short period of time. The yen remains a strong buy on dips, with a critical bottom likely already set. The yen has a shot at a 1000 point move up for the month of February based on my analysis. I remain bearish the Aussie, euro, pound and Canadian. The Aussie got that stop-triggering plunge I was looking for and the 300 points took more like a week than 2 weeks, but I would not assume the selling is over just because it hit my first target. Look for a little bounce, if any, and then more downside to 84.

Grains

Grains continue to feel the pressure of strong supply, declining expectations for global demand, and a strengthening dollar weakening exports. Soybeans are approaching critical support but outside of a 30-40 cent bounce I am not seeing much upside off that support. There is not much to say here folks except sell the bounces and expect more downside volatility than what is currently priced into the OTM puts. Rice remains a bear play with puts. Wheat continues to offer a different fundamental and technical outlook and I recommend buying wheat against a short corn or soybean.

Meats

The cattle fake-out from the week prior was not a huge shock but this spike rally should be sold into as long term this market is likely heading to 75. Hogs continue to offer the same trade setup as mentioned in last week's report with a week's worth of support to justify the trade further. So to repeat the trade: Hogs are at a critical juncture as 65.50 on the April contract - and that is all the technical inputs I need for a forecast. Short term I recommend a swing trade by buying it here with a double reversal stop at 64.40, suggesting a clear break below key support and a bearish outlook for weeks or months to come. If the upside holds target 68.40. If stopped into the downside reversal play then place a protective stop at 69.30. I know I rarely give specific trade recs in this report, and if you want follow up on this trade or more trades like this then I recommend getting my premium trade rec service www.moundtradesignals.com - it's my ultimate outlet for communicating my actual trade recommendations in a clear and concise format.

Metals

This past week the market got a glimpse of just how quickly gold and silver are capable of collapsing. Silver's history of trying to get ahead of the gold curve shined through last week as the market plummeted on fears of gold's collapse. The dollar is strong and the trend change is making a lot of bulls take profits, possibly triggering stops on the way down. The gold bugs and bulls will of course see this as a buying opportunity but they should be weary of jumping in too early - $850 gold is my target. Copper remains bearish on a declining global growth outlook and general producer selling.


Softs

Coffee is a showing some minor congestion right where I expect it to support out and quickly race to 150. Cocoa has come off the highs significantly and I see almost a straight shot down to 2400. The OJ market is tricky as it obvious the crop is not in great shape but to me it's a buy the rumor sell the fact market and that means the highs are in and the market is likely heading to 110. Sugar remains a buy on dips with call options, but overall this market maybe has a shot at running to 35-38 then crumbling. Cotton continues to be a value buy on dips in a shrinking supply cycle.

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.