Energies

Crude oil broke through key support overnight heading into this report, suggesting a strong breakdown may be underway this week. Look for a close below 97.40 on the March contract to confirm. Natural gas quickly reversed its first stab at a rally in what feels like eons. I would expect some volatility this week, but ultimately this is a place to get long natural gas with straight calls.

Financials

Friday’s report showed unemployment dropping to the lowest level in 3 years, with 243,000 jobs added, which was much higher than forecasted. I would not be surprised if they revise down for January come next month, but nevertheless this was bullish for the stock market and helped the S&P break out to yet another fresh near-term high. This is a runaway bull market that is overdue for a strong correction. Puts are highly recommended. The dollar has traded down during this stock market rally – as it tends to trade inverted this should be of no surprise. However, the surprising part would be the relative support the dollar has seen despite this strong stock market surge. In fact the S&P is up about 12% since December 19 while the dollar has declined less than 3% over that same time frame. The dollar is still being bought up by those panicking out of the euro currency. Asian currencies, along with Canadian, Aussie and New Zealand dollars, are all at or near extreme highs which makes the dollar a value spot for those exiting the euro, and is a direct beneficiary by the very nature of the U.S. dollar index’s composition being 58.6% euros. The Japanese yen continues to show strength.

Grains

Grains spiked last week as concerns over supplies from Argentina and the Ukraine persist. I continue to recommend put accumulation in beans and corn on this rally, while short futures are discouraged due to volatile weather related risk. Wheat is a spread buy against short corn or beans. Rice remains a short.

Meats

Cattle prices spiked down on option expiration Friday, and I expect that momentum to continue into this week as a top forms. Hogs are avoidable and congesting at the moment.

Metals

The metals complex is exposed to a big-time selloff this week and I recommend put buying with March options to play the near-term volatility. Expect a U.S. dollar rally and commodity deflation move this week to pressure metals prices. Copper remains a short.

Softs

Coffee prices broke support last week as a post-Tet release of Vietnamese coffee supplies could pressure both Robusta and Arabica. Cocoa is choppy and avoidable until 2198 is penetrated to the downside. Cotton is showing a fakeout rally in my opinion and a wave of selling should be expected. OJ has seemingly topped following the diminishing panic of the Brazilian OJ ban. Bottom line is OJ is about to get taken off my weekly report as it is approaching a nearly untradeable level of illiquidity and sporadic price action. Sugar is a sell on bounces.

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.