A critical shift in global economic policy occurred this past week with the EU's bailout announcement of Greece. Greece will now be supported with a stronger foundation to achieve private loans since the loans will knowingly be backed up by a bailout if Greece should falter. The simple act of the EU saying they will back Greece means they likely will never have to, however, the damage to the euro is done. The EU has shown without any doubt that they are now as strong as their weakest link, in this case Greece. By their willingness to support Greece they have proven that the stronger economies within the euro zone are weakened by the support demanded of them by the weakest economies. The circumstances are irrelevant because the action is now precedence and therefore confidence in the euro currency must be aligned to their policy making decisions. The decision this week has likely set the stage for a further collapse in the euro currency.

Energies

Oil continues to congest near the highs in a growingly bearish fashion as the strong dollar pressures oil prices on a global scale. The play here is long natural gas against a short crude oil, a futures spread opportunity or a defined risk synthetic play with a long natural gas call and long put in crude oil. Natural gas remains bullish based on a long term global demand shift, thus I recommend a buy on this recent plunge with straight calls to play upside volatility expansion and current reduced call premiums (compared to 24 month average.)



Past performance is not indicative of future results.

Financials

Stocks remained on trend line support and has put my timing a step behind here. Simply the fundamental and technical setup for the stock market is bearish, and the trend line support is showing serious signs of price exhaustion. I say the trend is not your friend here. I recommend playing contrarian and buying puts. Bonds continued to have pricing pressure as yields rise despite the likelihood of the Fed maintaining interest rates. I hear the arguments for raising rates and to me its nonsense. The Fed has only two issues to worry about here - housing and inflation. Inflation has not surfaced and the dollar remains strong amid a euro currency meltdown. Housing will get thrashed on a rate hike so the Fed will continue to see economic stability, low inflation risk and housing recovery as a basis for leaving rates unchanged. This means buy bonds on the dip. The dollar should skyrocket on this EU Greece bailout story and I just don't see a sell the news type of response here. The Canadian dollar showed some confirmation of my forecasted intermediate top and I suspect this week will see 95.60 if in fact momentum has swung the other way. The Japanese yen is just about at a now-or-never support area as a break below 107 spells disaster for this market. I remain a strong yen bull and expect the current price action to eventually be remembered as the final plunge before the epic rally. The Australian dollar topped once again and a move to 84 should occur quickly. The euro could see 125 in a blink of an eye with the dollar drawing ever closer to my forecast that:

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

Grains

The grain markets sold off most of the week ahead of the prospective plantings report on the 31st. While it might appear as if longs are taking profits ahead of the report a lot more of this past week's move could be attributed to the U.S. dollar rally, which means there is still a ton of downside exposure to a bearish acreage report. I expect supplies of beans and corn to be very strong, and a breakout in the U.S. dollar is about all the grain markets need to meltdown. I would suggest that a strong wheat supply is priced into that market and at this point it remains the lone value buy amongst the big 3. Rice is showing a break to a new low is likely in the cards, but overall the market should support above 1120.

Meats

Cattle prices set a spike high top and are a strong sell as profit margins at these prices brought in some sellers hedging at these levels. Hogs could see price support from Friday's USDA report showing a stronger than expected decline in hog inventories, however any bounce should be sold into with long puts or short futures with stops above the highs. Sell meats across the board.

Metals

Gold and silver remain choppy and bearish with the need to play catch-up to the recent U.S. dollar breakout. Metals continue to be a strong sell. Copper has developed a sideways pattern, likely snaking into a bearish formation and expanding in volatility as early as next month.

Softs

Coffee has developed an impressive bullish technical formation on a daily chart, setting up Friday's high as clear technical resistance. If penetrated the market could sail to 150 in a matter of a week or two. On the downside the market is exposed to a pullback to 132. Bull call spreads are recommended. Cocoa is a sell with straight puts to play volatility to the downside. Ignore the recent reports talking about a transition from poor yielding cocoa trees to rubber trees in the Ivory Coast. I suspect there are motives behind the report but overall the idea of transitioning out of cocoa during these price highs is unlikely - talk to me in 12 months when cocoa is at 1500 and farmers are looking for something better. Cotton has developed a critical technical head and shoulders - 78.50 is key support, but accept a break to 76.88 before getting bearish too quickly. Sugar is a buy on this market collapse with straight calls. OJ remains a sell on its way to 110. Lumber remains a cycle buy to 350 or higher.

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.