Energies

Crude oil remained choppy over the past two weeks despite a breakout bull run in the stock market and the threat of heated up Iranian-U.S. tensions. Crude, heat and rbob are recommended short plays using defined risk option strategies only – wouldn’t want to get caught with your pants down exposed short if WWIII breaks out if you know what I mean. Natural gas is a strong contrarian buy. Spreading long natty against short crude is worth another look as that spread should tighten in the coming weeks.

Financials

The stock market continues to break out after fulfilling a bullish Mound Ladle Formation but has likely run out of steam, and I expect a retracement early this week. The euro should sell off dramatically with it, possibly in reaction to Wednesday’s potentially Greenspan-like irrational exuberance statement out of the FOMC meeting. However, the Fed is far from the main fundamental influence on stocks, currencies and commodities these days – Europe is leading the path to self-destruction and the ebb and flow of the cancerous structure known as the euro is what is moving the financial markets. Keep a close eye on the Mexican peso after it made a major bull move so far this month, approaching critical resistance at .07665 that should dictate the long-term trend in this market. The yen remains a buy.

Grains

This is setup time in grains as the market positions ahead of plantings, over-evaluating carryover inventories and droughts in South America while ignoring the exposure the market has to a U.S. dollar rally and collapse of several European demand-heavy economies. Short beans and corn with puts, and spread long wheat against short corn. Rice is a strong short here.

Meats

Cattle spiked to critical resistance, penetrating intraday Friday, only to close below and look awfully bearish closing in the lower 20% of the breakout daily bar. Also it brushed up near prior technical resistance at 126 and failed. This is a critical week for reversing this recent surge with some downside volatility, but I continue to recommend straight deep out of the money put acquisition on this bounce. Hogs are in a congesting pattern with a slight bullish note, but I wouldn’t touch it – short if you must, but avoiding hogs altogether is recommended.

Metals

A sustained rally in gold and silver has lacked the strength needed to change bearish longer term momentum. Copper broke out on the perception that China GDP growth is contained, after the lowest GDP growth in 10 quarters, and the tight monetary policy attitude might come to an end. This should in theory help push demand to test the already low inventories, however look for copper to top out below 3.95.

Softs

Coffee is a strong short after failing on its recent rally attempt. The market is in a sustained sideways pattern, but looking longer term on a chart it is obvious the market is attempting to descend from epic high prices. Cocoa remains a short on bounces. Cotton should channel here or reverse the recent rally sparked by weather concerns. OJ is skyrocketing to historic levels as the FDA continues to test imports from supply leader Brazil for fungicide – get out of the way or actually just avoid trading this thin market altogether. Sugar remains a short with a straight July put play.

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.