Energies

Crude oil continues to show declining volatility while channeling. Look for March to break and close below 97.40 to indicate a failure. Natural gas may have long-term bottomed, but I would wait for the highs of this move to get taken out before being completely sold on the turn.

Financials

Stocks are choppy near the highs, holding on despite a less than enthusiastic FOMC meeting. The employment report remains a focal point as the market should see selling pressure ahead of Friday’s announcement. Bonds are worth a look for some call buying after premiums have dropped off due to a near comatose 3-month trading channel. The euro looks incredibly strong on a daily chart but I would discourage you from getting suckered in here – this market is a strong sell. The U.S. dollar is on monthly trendline support and is a buy here, likely to pressure European currencies along with the Australian dollar. The Japanese yen is ready for takeoff after a decent price surge and momentum on its side. Look for a breakout in February as the yen remains a buy.

Grains

Repeat from last week: 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.

Meats

Cattle looks bullish on a daily, weekly and monthly chart – but I’m all in short here with straight puts. Hogs are choppy and going nowhere fast.

Metals

Short gold and silver this week with bear put spreads. Copper is right up on my anticipated resistance area at 3.95 and is a short here.

Softs

Coffee is right up on key support and I suspect that any lower close would signal a clear break in the market. I suspect coffee could plunge 20% in a matter of 2-3 months. Cocoa has been rising steadily and may have established a short-term bottom, but I see upside as limited and look to accumulate puts near current levels. Cotton is also a short, along with sugar. The softs sector is very exposed to a rally in the U.S. dollar and concerns over weakness in the global economy. OJ is still avoidable but perhaps the thing that makes this market go the way of pork bellies is an out of control rally.

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.