The clear focus this week will be on Egypt and the Middle East; however this focus will allow room for independent commodity shifts that were previously hooked to the relationship of the stock market and currency moves. Expect to see sharp volatility as money is certainly on the move in many commodities.

Energies

Crude oil showed its true colors and its dependency on the Middle East for supply, as a more than a 3% rally on Friday came on the heels of pre-weekend short covering. The lack of a resolution in Egypt over the weekend, and the seemingly long road ahead for this country makes this 'premium' stay in the market for a little while. However, my gut says this remains a major catalyst for a selloff in energies and I would use this opportunity to develop further any defined risk put option strategies to play the downside over a 3-6 month time horizon. Natural gas remains a strong buy on continued usage spikes during this dramatically cold and stormy winter in the northern U.S. On a side note, Chicago's move to natural gas taxis may be the start of a significant trend, one that could be a fundamental landscape changer the way ethanol was for corn demand.

Financials

Stocks plummeted on Egypt fears on Friday, and I recommend selling into the Monday recovery should there be one. A possible test to 1285 may occur, but I suspect the highs are in for the stock market. Bonds will continue to get bought up on this stock market decline as the Fed remains steadfast in maintaining these rates - a move that leaves fear premium an opportunity to run ramped on the bond market. The U.S. dollar has setup the infamous reverse Mound Ladle Formation (MLF) on a weekly chart, indicating a severe bull rally over the next several weeks. This comes immediately following a bearish MLF, making them warring Ladle formations, a rare pattern that suggests the most recent formation is likely to win out. The MLF shows a band of absolute support between 7651 and 7763, with last week's low hitting 7770 before rallying to close the week at 7828. MLF's can cause some of the most sudden and dramatic reversals as quick retests of support, in the case of a reverse Mound Ladle, can result in quick erasing of the move to fresh near-term highs.

Expect strong selling in the euro and pound, along with weakness in the Canadian and Aussie Dollar. The yen remains choppy, in fact downright directionless, but I do not see this continuing. Long strangles with a bull bias are recommended to play the volatility. The S&P's move to downgrade Japanese credit is not a shock to those familiar with Japan's mounting debt crisis, but it does give pause for some investors reallocating funds to Japan from euros or other weakened currencies. I remain long-term bullish the yen, but nothing moves in a straight line and a healthy retracement is just as possible as a breakout rally - therefore a strangle is a better play than a straight bull strategy on a breakout. Play the volatility, which I believe is easier to predict here than directional movement in the near term, and go with a longer-term call side play with room to dollar average in lower on a selloff. The yen remains the lone foreign currency to buy on dips, even during volatility expansion, and I continue to stand by my forecast that:

The Japanese Yen futures will hit 140 before 80 or I will quit writing the Weekend Commodities Review forever.

Grains

Grains diverged from one another last week as wheat's rally has set a clear technical resistance (between 856 Ã,½ and 863 Ã,½) and potential top, while soybeans reversed an ugly bear turn and began a congestion pattern. Corn continued to congest while rice, a potential early oats-style indicator this year, created an important technical support between 1461-1464. I suspect grains are in for some selling pressure this week and look for the bottoms of these congestion patterns to be tested after a Monday fakeout rally.

Meats

Live cattle is making a slow road to developing a top while remaining in a bit of a holding pattern ahead of a grain direction. Hogs finally confirmed a technical bull breakout last week and appear set for a test of the 2010 highs. I do not believe there is fundamental strength here to break hogs out above 92 and recommend put plays here. A livestock culling of about 15% of South Korea's supply, due to foot and mouth disease, has helped boost prices. In addition the drop in hog inventory in Canada has helped to rally that market.

Metals

Gold and silver remain weak, and I expect a fear premium collapse this week. These two precious metals are the front runners for a leading indicator of a commodity selloff and they have both come well off their respective highs. I continue to see the near-term collapse of gold and silver as a very real scenario playing out. Copper remains a strong sell on an anticipated China slowdown.

Softs

Coffee continues to press the highs, but I feel upside is limited and the play is on the put side for the eventual fall from glory. Cocoa was limited in its upside after a spike rally followed the news of a cocoa export ban in the Ivory Coast. The ban has widely been seen as a success as cocoa is making its way to ports but are not being registered for export, which upholds the request for an export ban by not-quite-president Alassane Ouattara, who is using this tactic to push ousted President Gbagbo out of office. Keep in mind that exports are up year-over-year and this holdback, for the time being, appears to be just a temporary tightening on the global supply chain. Cotton has stretched to new highs, a move not all that surprising giving the market's shocking comeback after setting the initial spike high top back in November. Critical support lies above 15694. OJ is a sell with straight puts as the affects of a vicious Florida winter is unlikely to sustain prices through February. Sugar continues to rally on dips and lacks the technical pattern to say a definitive top is around the corner. However, a commodity selloff will likely take its toll the hardest on sugar and cotton, and therefore I would start positioning with puts long term. Lumber remains a cycle buy on dips all the way up to 350.

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.