Energies
The bounce in energies this week came after Iranââ,¬â"¢s response to the U.N.ââ,¬â"¢s incentive program to halt uranium enrichment was anything but cooperative.  The mid-week retracement, due to a strong inventory report, was all but wiped out heading into the weekend as the threat of soon to be hurricane Ernesto builds strength while heading into the Gulf of Mexico.  A Cat 2 storm in the Gulf would not be a major threat to many of the deep water rigs, but the fear factor following Katrina is unmatched in this area of the fundamental history of the energy complex.  It is the exposure rather than the reality that will have this market spiking on every Gulf of Mexico storm for the rest of the summer.  Moreover this is exactly what I meant when I talked last week about the ideal fundamental week the market had the week prior, and that it would be short lived with all of the potential issues facing this market.  Since the storm will likely not show its full hand until Tuesday or Wednesday the marketââ,¬â"¢s suspense will likely cause volatile price action early in the week.  The increase in both put and call premiums in natural gas suggests the exposure to volatility spikes is in full effect and the market is begging for option sellers to enter the market at this point in time.  If you went long calls based on last weekââ,¬â"¢s report then pull these options Monday and take a look at selling Nov. natural gas $20 calls for $1,000 or $15 calls for $3,000-$4,000 ââ,¬â€œ to me it is too good of a premium collection opportunity to pass up ââ,¬â€œ just be able to back it up if the timing isnââ,¬â"¢t perfect.

Financials
The bullish momentum in the stock market faltered this week, but the congestion near the highs rather than the anticipated breakdown helps to maintain a bullish sentiment for another week.  The gut says the selloff should still occur, but normally we would see a quick pullback on a technical breakout like the one we had last week.  Instead we are meandering around the highs and tempting the bears to enter early.  A break below 1289 would be a good confirmation, or a close below 1292, otherwise be careful.  Bonds continued to show strength as a dead report week and no news Bernanke speech on Friday did little to shake the bulls.  Two interesting moves occurred this week.  First the market broke a bull setup and sold off to 109-16 before supporting out just above a previous low of 109-15.  The market then reversed the move by the end of the day.  This is quite a bullish occurrence, but a low volume one that could be a bit of a false indicator.  Then, prior to Fridayââ,¬â"¢s no news Bernanke speech the market was bracing for a move to the downside before a relief no news rally ensued.  This screams to me that the first report that suggests the Fed may need to raise rates again anytime soon will rock this market.  Buy some October puts on the cheap and wait out the reversal (even if it is a temporary one).  The dollar is showing some decent price support and should continue to rally, suggesting short yen and euro plays.  The Canadian is so independently strong that it may need to test the highs before faltering.  I remain a long term Canadian dollar bear at these prices.

Grains
Beans and corn failed again this week, giving value buyers a great entry.  Meanwhile the wheat market showed its divergence and ability to maintain independent strength due to its crop issues.  Rice fell apart and, while I remain a buyer of OTM calls, this is a great example of why no one should trade rice futures.

Meats
Live cattle setup another bullish pattern that looks like a break to a fresh high early next week ââ,¬â€œ Donââ,¬â"¢t Believe It!  Buy puts and play contrarian.  I am now short hogs with a double stop reversal at 67.90. 

Metals
Metals supported a bit this week as a little flight to quality premium reentered the market psychology mainly due to the rise in energy prices and potential conflict in Iran (which offset a bullish U.S. dollar trend).  Gold is stuck in a seriously tight pennant on a daily chart and is setting up a break.  Long silver strangles are a good play.  Copper is still worth looking at for some put plays.

Softs
Sugar prices got a bit of a bounce this week, but couldnââ,¬â"¢t sustain the break through gap resistance.  There are several gap resistance areas and if this market is going to reverse to the upside I want to see three things occur: 1) A one day price spike of 60 points or more that holds on the close ââ,¬â€œ V-shaped market reversals tend not to allow traders to have a shot to buy on value.  2) At least two gaps are filled on a closing basis ââ,¬â€œ a one gap fill on a price chart with several gaps is more market psychology than a technical reversal, but two shows momentum.  3) A spike in call prices beyond normal volatility increases ââ,¬â€œ this will show a big move by the shorts to protect without covering futures, but in essence this is really a foreshadowing of a short covering rally.  OJ sits near the highs despite Ernesto appearing to dodge Florida ââ,¬â€œ keep an eye on the weather here and avoid futures.  Coffee looks strong ââ,¬â€œ Dec. OTM bull spreads still recommended.  Cocoa is volatile and choppy ââ,¬â€œ buy calls heading into the ridiculous Ivory Coast elections as violence will create a bull market psychology.  Cotton is still my contrarian pick ââ,¬â€œ buy puts or sell call premium. Lumber remains a buy ââ,¬â€œ just wish it gave us a better entry price.

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.