Welcome to the calm before the storm. I believe we are still in a deep global economic recession, but the rate of decline has clearly stabilized in recent months and if investors feel that the stability is giving way to more economic slowdown then the stock and commodity markets are expected to take big hits. Let's not forget that the stock market nearly doubled in just two years and commodity prices like oil have about tripled from their lows. To me, these are overbought market conditions that beg for a reason to reverse, and that reason is upon us. Why do you think the stock market took such a big hit when the threat of an economic downturn in the third largest economy in the world made headlines? Without demand there are no profits.

In commodities, demand is often a fairly stable situation while supply receives much of the analytical focus as fluctuations due to weather, politics and other less predictable events are frequently the catalyst for big price moves. However, when the world demand variable becomes such a moving target as it has been over the last two years, the focus shifts to what the growing population of the world will demand in several key commodities. Thus demand-based shortages become a volatile reality, and the slightest shift in outlook can wreak havoc on commodity prices. If demand is the focus, as it should be, then what happens when growth slows or stops altogether? What happens if or when China slows? What happens if Japan goes into another recession? What happens when the European Union gets hit with another Greece-like economic crisis? To put it simply, the pricing outlook for stocks and commodities need to be adjusted to account for major drops in demand.

It is important to acknowledge that the risk of change in consumer confidence and market sentiment has become over weighted to the bearish side. This means that the risk of a negative turn in market psychology outweighs the potential benefits from a continuation of the bull trend. Therefore it becomes a matter of events, or catalysts for lack of a better description, that will turn the tides. The political tensions in the Middle East, China's possible slowdown, Japan's environmental crisis - take your pick.

The trend is your friend? The easiest thing for any analyst to do is ride an existing trend while, in contrast, the most difficult is calling the potential turn. I have spent my career working to call market turns, being a contrarian when I feel I need to be, and telling it like I see it. Granted, following 20+ markets and calling major market moves consistently is no easy task, and with that job comes failure as well as success. My life experiences in this business have led me to this very important time, this period in commodities that will likely never be repeated in my lifetime in the same way. Many investors will continue on betting the bull and potentially lose everything on the turn I see coming in the markets. For those that have the change to try to get ahead of the correction I believe there will be one of the greatest opportunities ever presented in the commodity markets in the next several months.

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.