Energies

Oil prices came off the highs hard and fast, coinciding with the stock market reversal. Crude oil should see a significant pullback to $75 – obviously quite a ways away from current levels. That target is based on fresh lows sparked by the S&P penetrating support and the dollar continuing its breakout rally. This week this sector might bounce momentarily. RBOB and heating oil should follow suit, while natural gas is a contrarian long spread play against any of the above.

Financials

The S&P fell hard off the December 8 highs at 1266 – a topside resistance level that should hold for some time. On a daily chart the S&P is actually showing a bullish Mound Ladle Formation which suggests a volatile rally that should test 1266. I am not one to ignore my own indicators, so a flareup should be expected followed by severe downside – basically a last suckers rally before the stock market begins to collapse.

Bonds should remain choppy but I would peel off previously recommended premium collection strategies. The dollar is in a bull breakout and, even if it pulls back below 80 momentarily, there is substantial upside expected long term. The euro currency is in real trouble and they are throwing money at a fire expecting it to go out. The money will flock to the dollar, and perhaps the British pound eventually, once the market realizes England made the best move they could to separate from the euro. The yen is quiet and choppy – minus another intervention here this market should rally in the near term.

Grains

Grains have seemingly flat-lined, but with the exception of soybeans these markets are really just in a slow technical failure. It is December and seasonally speaking there isn’t a whole lot to trade off of this time of year except to speculate on plantings and look at global demand. A dollar rally should put another round of selling in here, but it may be January before we see it. Long term these markets have a long way to fall, with wheat holding a bit better from here than the rest.

Meats

Cattle and hogs are both in a downtrend, hogs more like a freefall. These markets should fall dramatically into 2012 and puts are recommended.

Metals

Gold and silver took it on the chin this past week after the dollar broke out to the upside. Traders got a taste of volatility for the first time in a while, and I would not expect that to end anytime soon. I expect a fakeout rally to end in the biggest selloff volatility since the Hunt Brothers silver rally failed.

Softs

Coffee continues to chop lower with escalating volatility to the downside expected in coming weeks. Cocoa self-destructed as anticipated and this recent bounce looks like a dead cat to me. Cotton is both bearish and not worth trading here. OJ and sugar remain strong sells.

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.