The BP oil spill remains a significant supply issue for the energy markets. Typically crude oil would experience a sell-the-news price plunge following something of this nature, however you can't sell the news if you don't know what the news is. A recent example is orange juice during the extended freeze conditions in Florida back in January. The OJ market was stuck in a rally because the market participants didn't know how bad it would get, but when the temperatures rose and the damage was realized, the market began a strong decline. Oil is setup similarly but the question becomes how long are we going to be in the dark about the real damage caused by this spill? I think by now the cover up is over and there is a clear acknowledgement of a serious spill. What remains in question is how long until they cap it so the final damage can be assessed? Figure within a week of capping it the market begins to fall, but it could be days, weeks or even months before the spill is 100% stopped. That being said this offers bears a great entry opportunity with bear put spreads. Natural gas remains a long term buy and a good spread long against a short crude oil.

Financials

The S&P topped below 1215 as anticipated and the plunge has likely begun. The market congestion makes this a difficult play to time as the market could chop for a bit. The gut, however, says we see 1156 by the end of the week. Bonds continue to be a breakout buy as the fed reiterates their stance on long term low rates and then gets backed up by the next nothing inflation numbers. As readers of the WCR already know, the low interest rates do not mean inflation despite what some analysts believe. Interest rate policy is used to tighten or loosen money supply - lower rates makes borrowing cheaper and theoretically makes money easier to access, while higher rates make borrowing harder and more costly. Logic would suggest that lower rates for an extended period would put a lot of money into the economy and in turn bring inflation. However, in this case money is actually harder to come by than three years ago - ask yourself is it easier to buy a home, get a car loan or receive a business loan than in 2007? The simple answer is no and that means money flow is tighter despite low rates. Until that drastically changes the Fed has the freedom to keep rates at near 0, and why would they risk hiking rates too soon and double dipping this thing when there is minimal risk of inflation? This is also a strong bull indicator for the U.S. dollar which has been suppressed due to inflation fears. The recent rally has been spurred by the collapse of the euro currency, which I expect to not only continue but be bolstered by the recent drop in inflation fear,

The euro remains a sell. The Canadian dollar is a strong sell on technical confirmation below 9640. Buy the Japanese yen down here with straight calls. The yen is the wild wild west of currencies but has been in a coma as of late - a coma I expect it to wake up from and breakout to the upside in volatile fashion.

Grains

Soybeans have turned bearish as corn and wheat prices have stabilized. I wouldn't buy into any of the recent price action - grains are a strong sell on any bounce, wheat being the lone exception as a value buy between 4.50-5.00. Bottom line is there are a lot of corn and beans planted and little to suggest this crop year will bring any supply or demand issues. Continue to spread long bean oil against short meal.

Meats

I suspect cattle prices topped last week and could slide substantially in coming weeks. Put buying is recommended. The fakeout dip in hogs happened last week and setup a critical technical support going forward. A failure on the June contract below 83.60 would indicate a bear move, with a bull play until that support is penetrated.

Metals

Gold didn't quite follow through on the $50 plunge I thought was possible last week. The monthly chart had indicated a likely fulfillment of the expansion of the lower end of the month's range, but instead broke out to the upside and now appears bullish. This is a critical month for gold's technical trend as this price breakout needs immediate follow through otherwise the market turns bearish in a hurry. The April high of 1181 should not be penetrated by more than $10 for the potential for a bear trend to develop, which suggests a short term futures play is possible at current levels. Find out what the gold play is in this week's Mound Trade Signals Report.

Softs

Coffee turned bullish with critical support above 130 on the July contract. Momentum and upside volatility is there and coffee should run to 142 in a very short time frame. Cocoa remains a sell with puts. Cotton is a buy on dips. OJ remains a sell without enough downside potential to warrant an actual trade. Sugar is showing a critical bull turnaround for this upcoming week and I will be issuing an official trade recommendation in this week's Mound Trade Signals report for subscribers.

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.