Reality set in last week that the EU bailout was not all it was cracked up to be. Remember the EU is now only as strong as its weakest link. The fall of the euro has begun and there is more downside ahead.

The stock market has turned instantly bearish on the Goldman Sachs news. They are the epitome of U.S. capitalism and the ultimate sign of a chink in the economy recovery armor is upon us.

The volcano news from Iceland also becomes of reasonable importance as it can have long term affects on global weather, crops and tourism. The last time this volcano blew it was two years before they saw the light of day - literally.

Energies

Oil's fast turn south follows a bull fake out to new highs and coincides with a stock market reversal and U.S. dollar bull move. Oil supply and demand, OPEC and geopolitics will likely take a back seat to a strong stock market/commodity/dollar cross-market correlation and thus the stars have aligned here for what I believe will be some serious selling in the energy sector. Natural gas may very well be the lone exception, building a reasonable foundation of support and playing the spread to tighten between crude and nat gas remains a solid approach. However there is downside risk in natural gas and I do not believe that it is worth being long here until June closes above 4.45, beyond which the upside potential is substantial.

Financials

The Goldman news put fear back into the market, something that it had been missing for months. The bottom line here is the VIX jumped nearly 20% in one day and shows how the market is susceptible to violent downside reversals, one of which may have very well just begun. I recommend buying puts with the Vix under 20. Bonds remains a strong buy and I see bond calls as a lower premium cross-market play on the stock market plunge. Basically the potential for upside volatility in bond calls are roughly proportionate to the downside volatility potential in S&P puts with the S&P puts maintaining excessive current premium bias, thereby making the bonds calls perhaps a discounted play on the same forecast. The Canadian dollar remains a strong sell along with the Aussie. The yen is slowly building congestion for what I believe is a volatility breakout of historic proportions. I see it as just a matter of time before the Japanese government loses control of the currency and specs break the Bank potentially doubling the yen within 12-24 months. My euro/US dollar forecast remains the same: The euro could see sub-130 prices by month end as the sell-the-news effect takes hold of the market and brings us 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 recent strength in grains is likely short-lived as it was supported by strong oil prices and a choppy dollar. With both those markets on the move and strong supplies for beans and corn expected, I see a 20% price plunge in the next 2-3 months in both markets. Wheat remains a contrasting value buy against corn or beans.

Meats

Hogs remain a breakout bull market, not that I am suggesting joining the bandwagon here. There is a turn coming but I do not see a reason to jump in front of this speeding bullet just yet. Live cattle remains a long term sell at these levels. A pennant is forming on a daily but I believe it is a bear turning point and will break the pennant early.

Metals

Gold and silver plunged on the S&P selloff and dollar rally. The euro currency is in serious trouble and that realization is likely going to send gold and silver into a tailspin through month's end. Price deflation in oil and grains will also be catalysts for a decline in precious metals. Copper remains a strong sell as concerns over global economic weakness stronghold that market.

Softs

Coffee is breaking the near-term support but the long term trend remains intact. Support is around 127 on the May contract with a bottom trend line support at 111. Sometimes bull breakouts need real bear fake outs to create momentum. I recommend scaling into long calls or bull spreads here as a strong dollar will only affect this inverse correlation until supply issues become of paramount concern. Cocoa remains a strong sell with puts. Expect a move to 2500 within weeks. Cotton is a buy with stops below 76.88. I expect sugar to make a move to 18.80 in the near future. OJ remains a sell on bounces to 110. Lumber is breaking out to the upside as anticipated, with 350 a realistic intermediate term target.

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.