Energies
Crude experienced a choppy and volatile rally this week as anticipated. I suspect we are at or near a top in the market as selling pressure should be seen from $59-$62 on the March contract. This is an excellent opportunity, albeit risky, to sell call premium on price spikes to upside. Natural has also seen significant strength despite yesterday’s selloff coming after the inventory report. This is a market overdue for a strong rally, but 25% in two weeks is about all she wrote and selling call premium here is also recommended on rally days.



Financials
Stocks surged through previous contract highs, but this choppy action still creates an overall topping indicator. It is difficult for a bear to continue to give logical reasons for a selloff after 7 months of incredible and resilient strength, but it is that very trend that is the reason this market will see a correction. You can count on one hand how many times the S&P has rallied for over six months without at least a 4% price correction. Moreover, there is nothing impressive about the average daily volume, the amount of fund buying or the vertical momentum of this run. The correction is not a matter of if but rather when and how far.

The bond market got a bit of a bounce on economic news this week, and the lack of follow through on the previous week’s push down is yet another confirmation of a market going nowhere.

The dollar was choppy and dead for much of the week, with a nice Friday reversal following the initial selloff from the employment report. The Japanese yen should be looked at closely as a strong buy at 83. Calls are dirt cheap and the market is likely to correct off of this support. The Canadian dollar offered some confirmation this week of continued downside momentum and is worth an inexpensive long term put play.

Grains
A continued pennant in corn sets up a possible breakdown next week heading into the WASDE report. Critical gap support at 3.964 was breached and a rally attempt floundered to create a tight bear consolidation pattern. Look for a close below 3.95 to confirm the bear break. Soybeans offered nice supportive trade as specs are beginning to see the benefits on long term bull trades in beans with the potential switch over of large amounts of acreage to corn which will likely affect long term supply.

Meats
A bearish feed report provided weakness in cattle this week, but a late stop triggering rally this afternoon has the market reversing its technical bearishness heading into the weekend. Monday is a critical momentum day, with a lower close reversing this market once again back to bearish, but a positive close giving bulls momentum. The hog market remains a strong bull breakout buy.

Metals
Gold and silver broke through some critical resistance this week and appeared to be setting the stage for a major price surge, but the reversal in the dollar today from the employment report sent prices reeling across the metals sector. If this market doesn’t test those highs by Tuesday or Wednesday then it could get ugly to the downside. Copper is in a complete failure stage that could continue beyond anyone’s expectations. Short futures with a long call as protection or straight put buying is recommended on bounces.

Softs
OJ collapsed after relief from Florida frost fears and triggered stops caused the market to go lock limit down. Late week support has been on light volume and is unlikely to sustain itself next week. Downside exposure is tremendous despite the potential for frost or general damage to the California and Florida crops. I suspect that a new seasonal trend will develop in OJ where a post-winter and pre-hurricane season period will create a seasonal decline between February and April and then just prior to hurricane season specs will reenter the market long. Coffee is turning a bit bullish, but needs a break and close above 125 before confirming a change in momentum and chart bias. Cotton remains a sell. Sugar is failing as a technical break below 10.53 is suggesting a possible run to the contract lows. Cocoa held, relatively speaking, critical 1573 support (excluding a gap open that recovered in the first 5 minutes) and appears to have resumed its bullish trend. Lumber remains a buy – look at March 270 calls and out longer term as well.

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.