Monumental March is upon us! I expect substantial volatility expansion in March in crude oil, grains, cocoa and coffee sparked by individual market events, not to mention a critical turn for the U.S. dollar. I found my 2010 Trade of the Year very early this year and I am excited to share it with you in my 2010 Commodities Update and Coffee Report (release date is now March 9). Sign up to get the report here: http://www.futurespress.com/mega-forecast2.html

Energies

Crude oil appears to have set a critical secondary top and I suspect this week ahead will offer a choppy confirmation. Natural gas has sailed down to form the last leg of a head and shoulders and a bearish chart pattern for anyone who looks at it even from a distance. This market has all the signs of shaking out the bulls and forming a capitulation bottom within the next two weeks.

Financials

The stock market appears lost in a battle of short term direction, but do not be fooled by this 'lull you to sleep' price action as this market sector is likely to erupt with downward volatility as we approach mid-March. Bonds have already signaled this with a flight to quality rally this past week. The uptrend in bonds is likely to support the U.S. dollar which I believe will sustain a rally without much price retracement. I continue to standby my prediction that:

The dollar will hit 86 before it breaks below 70 or I will stop writing the Weekend Commodities Review... forever.

The yen remains a strong buy. The Canadian dollar did top out as anticipated but the current near term technical formation suggests that for the next 3 trading days the market is at risk for a spike rally, so bears take to the sidelines and wait to pounce. The euro, pound and Australian dollar remain strong shorts.

Grains

A solid rally in wheat and corn has the grain markets buzzing again, and it is that time of year when the market builds up to the prospective plantings report. Sure there is some reason to be interested in grains, but for me I am interested in taking advantage of any pop to get short ahead of the plantings report. Normally I wait for the report to make my forecast for the growing season but this year is different. This year I see something happening that is worth taking advantage of before the report. I unleash this strategy in my 2010 Commodities Update available at: http://www.futurespress.com/mega-forecast2.html . In the meantime let's just say the grain markets are about to heat up and I suspect there will be a great entry right around the corner. Rice remains a strong bear play.

Meats

The meat markets are riding a high that looks more like a bubble about to burst to me. Heading into critical planting season for grains spells high input cost risk for ranchers and I recommend using puts for aggressive volatility bear plays in both cattle and hogs.

Metals

On a monthly chart the gold market filled out a critical bearish monthly bar in February, but closing near the highs is never a bearish sign for any analyst. I believe any break below the February low resumes the bearish trend. Silver should follow suit. The copper market has been all over the map as everyone focuses on China demand. I remember back a few years ago when copper began its epic rise the market was all chattering about how it would take a solid three years for supply to even begin to catch up to the demand. Now we face this nearly unlimited demand panic and I can't help but feel it's a little over-hyped here. We are talking about a country that will possibly implement laws to prevent runaway growth. The markets are not controlled by China but rather intimidated by it. Short copper here with an expectation for a move to 2.40 on this next leg down.


Softs

Coffee has broken short term support but remains well above the long term trend line and is offering a unique buying opportunity for long term buy and hold bulls. Cocoa is breaking and technically looks like it is falling off a cliff. Puts remain a great play on its way down. Cotton is on a rocket ship higher and I suspect 2010 will offer one of the biggest rallies in cotton history as acreage will potentially see historic lows and demand makes a global comeback. Sugar has broken trend and momentum has swung bearish, but with a lack of downside volatility indicative of a market collapse. I believe this is not the last of the sugar rally. However, there is equal weighted risk in my opinion and long strangles are really the only play I see as offering a solid risk to reward ratio. OJ is in super congestion mode and even though one could argue that it broke out of a pennant last week, all I can say is this is the OJ market folks so don't jump the gun.




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.