Energies
A Monday surge in energy prices, after a critical Alaskan pipeline had to be shut down, ultimately led to a secondary top in crude.  The market spent the week consolidating back down to the mid-range of my anticipated trading zone ($70-$80).  As I have been saying for weeks, the right play in energies is selling premium – calls on rallies and puts on dips.  The market is exposed to a breakdown or a breakout, but the setup is for a few more weeks of range bound trade, and with premiums as high as they are you can collect some serious cash.  The pipeline story is a real tangible supply issue for the markets, but clearly the U.S. needs as much positive PR out of this ugly situation as possible.  So when news of a partial reopen of the pipeline came out the market reversed the Monday rally.  Nevertheless I suspect we will see persistent supply problems here as this ongoing problem develops into something that could be far worse.  Despite the real supply threat of the pipeline, the market is more sensitive to the potential threat of Iranian or Syrian participation in the Israel/Hezbollah conflict.  Fear is almost always worse than reality.  Natural gas has been on a wild ride and the plunge following the declining heat wave threat and rolling blackouts has found price support.  This is another market that could break either way but is likely to test several price points on either side before another major move.  Sell premium here as well.

Financials
The market failed below 1305 and stocks appear to be in bear mode as anticipated.  Be weary of the support that came in to end the week.  If the S&P doesn’t break 1262 by Wednesday this is a fake out (albeit a temporary one).  Bonds had little reaction to the Fed’s decision to appease the world and hold off on another rate hike.  The market is going to be so caught up in the near term economic reports that price volatility and choppiness should be expected.  The PPI and CPI reports this week should put pressure on bond prices as inflation fears will likely break bonds out.  The gut says go counter technical and play a move back to 106, but predicting reports and the market’s reaction to those reports is not an easy task.  I remain in a long bond strangle.  The dollar finally found some price support, just about at the last price point before it would fall apart.  This should mean a resounding rally and euro plunge if the support is for real.  Buy euro puts.  The Canadian broke up through congestion and despite a nasty chart this might be the last shot at a good entry into a short.  The market is taking a last effort at a price rally before giving into the first major retracement in this market in a long, long time.  The yen is a good short here, with stops at 8721.

Grains
The crop production and world supply and demand report gave way to a ‘sell the news’ reaction on Friday, despite a fairly bullish bean report and wheat’s drawdown of ending stocks.  If we do not get a major price rally on Monday this could be the end for wheat’s strength.  However, the gut says this is an opportunity to buy value across the board and if we gap lower on Monday I would be a buyer (September) - $5.44 on beans, $3.70 on wheat and $2.16 on corn.  Rice continues to impress with a strong technical breakout followed by a couple of days of consolidation.  This market could be up 15% in a month – get long calls.

Meats
Cattle prices continue a strong bull climb, with rising cash prices and issues over another case of the crazy cow in Japan overshadowing the market this week.  The bear view has clearly not panned out, a repetitive pattern in this market for the last few years.  The market’s one big retracement has nearly disappeared and the technical pattern is both short and long term bullish.  Nevertheless, I must be a contrarian and a put buyer here – long term.  Hogs remain bullish.

Metals
A strong gold reversal and bear technical setup is likely exposed to US dollar movements next week and could be in for a big selloff.  Get short Oct. at 642 with a 667 stop and 615 profit target.  Also buy some puts for a potential volatility spike to the downside.  Silver remains range bound and a long strangle here is not a bad idea.  Copper is on the decline despite the strike in Chile – buy some deep out of the money puts (March 180 puts for $150?).

Softs
Sugar plunged on Friday, following a technical failure and a supply report showing a huge spike in inventories (mainly due to the increase in imports from the USDA’s July 27th sugar program provisions).  This market is melting.  Those 13 strike sugar puts that ran you about $50 when I told you about them a few weeks ago are running about $350 now – scale out intelligently (50% here, chop out of the rest).  Coffee is having a hard time breaking critical 110 resistance but I am a big buyer of Dec. out of the money bull call spreads here.  Cotton is still my contrarian bear pick.  Lumber is a buy at 240.  Cocoa filled the gap and is setting up a strong rally but also a possible Mound Ladletm failure if 1598 holds.

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.