Energies
Al-Zarqawiââ,¬â"¢s death gave the market a breather, but overall the bull setup in energies remains and the key technical resistance in the market has been penetrated.  This leaves only the contract highs as remaining resistance and fresh highs continues to be very likely.  This long term bear trembles at the idea of $80 oil, but it sure would make a great short up there.  I recommend exiting bull call spreads on a move to $76 and entering into credit call spreads around $78-$79 (short August $85 calls?) with a top likely between there and $82.  Long unleaded versus short heating oil is still the right move until the crude price target is hit. 

Financials
A week of complete stock market failure offered a glimmer of hope on Thursdayââ,¬â"¢s key intraday reversal of itââ,¬â"¢s morning collapse.  Nevertheless, despite a benign trade deficit number and Al-Zarqawiââ,¬â"¢s death, the S&P ended the week at fresh 2006 closing price lows.  The completion of the Mound Ladletm failure sets up a possible short term bull reversal next week, using Thursdayââ,¬â"¢s intraday low as a key gauge of the marketââ,¬â"¢s ability to establish support.  I am a short term buyer with stops below 1235.  The bond market surged on a flight to quality move (stock market plunge) and overall mixed views on near term interest rate policy.  The bottom line is the likelihood of continued Fed rate hikes is not properly factored into the market, furthered by the ECBââ,¬â"¢s Pres. Trichetââ,¬â"¢s comments on Thursday regarding inflation concerns.  This means buy bond puts with some time on them and watch the market play catch-up to the downside. 

Trichetââ,¬â"¢s comments were more significant than many would care to acknowledge.  For sometime the ECBââ,¬â"¢s lack of voiced concern over inflation, thereby diverging themselves from the Fedââ,¬â"¢s view, has been the catalyst of this 10% or so surge in the euro.  With Thursdayââ,¬â"¢s comments virtually destroying the entire fundamental basis for that underlying move in the currency, the market will have no choice but to retrace much of its gains.  These moves tend not to happen in one day, but rather look for the euro to fail to the 1.2350 range over the next month or so.  The Canadian dollar found strength in a surprisingly bullish employment report but is still filling out a head and shoulders top.  The move gives a terrific entry point into short futures and bear put plays.  The market is overdue to retrace and a clear technical top at the highs gives traders a clear exit point on an opposing move.  This is the best setup in the Canadian for a bear trade in quite some time.

Grains
The crop report on Friday could be summarized as broadly insignificant, but the USDAââ,¬â"¢s comments on wheat were important to reiterate.  The US wheat crop is by no means the worldââ,¬â"¢s wheat crop and while US wheat supply is in shambles, the global situation is far less devastating.  The US ending stocks estimate was reduced just under 5% for corn and just about 7% for wheat, but the bean crop forecast was marginally increased.  The report is insignificant because the market will likely only turn bullish if the weather helps it out.  Continue to focus on the 6-10 forecasts and trade long premium plays as volatility expansion is expected in the very near future.

Meats
Cattle offered signs of topping on this extended dead cat bounce (failing a pennant formation), and rising weekly beef production combined with neutral USDA price estimates may help this market resume its long term downtrend.  I recommend developing bear plays here, with solid confirmation if the market closes below 7810 on the August contract.  Hogs, on the other hand, have cleared through major resistance and appear primed to run another 10%, although I am happy to take profits and walk away at or near current levels given the overbought situation in the near term.

Metals
With the perception of a strong shift in the US dollar trend, the metals markets continue to fail miserably.  A straight shot to $500 gold is not likely, and therefore the market may see buying support if the dollar shows signs of wavering next week.  Take this as an opportunity to relieve yourself of longs you held far too long and establish a put play for the impending pullback.  However, it is important to acknowledge that this is a market that I have been a big step behind in for a very long time (with the exception of recent reports), and a good trader knows when to step aside from something until they are a step ahead.  Too few analysts and newsletter writers admit when they are a step behind and I am more than happy to let my newer readers know where I stand in this sector.

Softs
The USDA left the crop forecast in OJ relatively unchanged (a slight increase in the projected juice yield), but the OJ market only cares about hurricanes for the next couple of months.  You can sell Sept. OJ 200 calls for $225 on a decent up day.  The estimate for 2006-2007 world ending stocks in coffee put the stocks to use ratio at its lowest levels in 2 decades.  The projected crop in Brazil is solid but the market is way too oversold to do anything but be a buyer heading into frost season.  Everyone says this is the year cotton surges, but all I see on a long term chart is a massive consolidation and a neutral to bearish pennant.  Cocoa remains a value for a long term bull play.  Sugar prices tumbled again this week, but overall offered some significant intraday volume increases amid a tighter trading range, suggesting morning dips are being bought into heavily and the potential for a bounce and/or extreme price expansion next week is very likely.  I highly recommend long strangles in this market.  Lumber is long term bearish but short term overdue for a bounce ââ,¬â€œ look for an entry on a bounce to the 310-320 area with some puts.

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.