Energies
Crude continued its bull move as extreme cold, a war of words with Iran and a bullish surprise in the weekly inventory data all helped crude quickly penetrate psychological $60 price resistance. However, after two daily tops just below $60, the majority of Friday offered trade above that price only to fail by the close and be back below $60 heading into Monday. This is a bear indicator. If the market reverses and closes above $60, the next price resistance is at $63 and the gut says that will not even see daylight as the market tops and reverses into a bear trend. Sell call premium, especially short term natural gas calls, and buy longer term put spreads.

Financials
The stock market’s resilience was met with a strong selloff on Friday as earnings, GDP and an extreme overbought market condition sets the tone for the long overdue and anticipated market retracement. With a plethora of economic reports due out next week there should be some serious volatility ahead. Bonds supported out and are range bound.

The dollar also appears range bound although I suspect the underlying volatility in the currency sector will pick up a bit in coming weeks. Often times when a market has been stuck in a tight range for an extended period, like the euro, it offers a false initial breakout signal. This will likely be the case here as there is little to force a major trend, but enough potential volatility to force the price to go outside of the range. The Japanese Yen offered some signs of support only to resume its decline this week. If the market closes below 8250 there is little stopping it from a complete collapse on a technical level. On the other hand, a break and close above 8400 would create substantial bullish momentum. This is a market to watch closely and play those two price points as entries with the other price point as a stop with a reverse.



Grains
Grains got neutral to bearish crop reports but showed strength as a relief rally ensued mid-morning after a lack of selling pressure was seen. This is a critical week ahead in the grain sector as corn must stay below 4.21 to have any chance of a much needed price retracement. A break above and watch out! Corn will likely lead the grain sector, although the recent technical shift to bullish in beans could be a standalone play. Many market participants see the soybean complex as an excellent underdog play as farmers abandon their beans for greater returns in the corn market forcing the long term supply to decline. Moreover, McDonald’s move to soybean oil could be an industry leading move that will create an epic long term shift in the demand model for soybeans and its derivatives. This is a market to watch long term and I suspect buying soybeans and soybean derivatives against a short corn play could pay big dividends if held over an extended period of time.

Meats
I must admit, it is tough to be about as close to a perm-a-bear in cattle as you can get and yet have to watch choppy trade week after week. I get more false trade false signals out of cattle than any 3 markets put together and yet I find myself drawn to continue to short this market. Fundamentally I see this market meandering around all time highs just waiting to fail. There are cyclical supply shifts in markets like grains, which are easier to identify and predict, but markets like cattle have their cycles too. This bull cycle is overdue for a supply shift and a bear turn. Hogs are still holding a bull trend line and remain a buy. Pork bellies, and I hate to recommend any play in this market, is offering a nice short play against long hogs (2 short bellies to 3 long hogs).

Metals
The entire metals complex is quite bullish on a technical level, although one must question the underlying fundamentals that will push the sector higher as oil will likely top and the dollar should be choppy and non-directional. Gold broke out of a consolidation pennant and silver is well above price resistance. Even copper, which could have retraced to zero without being a shocker to me, is showing signs of price support. I am not on board just yet, as it is critical to see a fundamental reason or confirmation of some correlated or inversely correlated market move before mortgaging the farm on this one. The right play here is a near the money long strangle in either gold or silver over a two month time horizon.

Softs
OJ has stabilized after failing below 190 channel support. Friday’s USDA numbers were actually somewhat bearish for the market, as the crop estimate was unchanged but the yield improved. However, with cold weather across the U.S., many traders are still afraid to short this market with the possibility of frost still present. Put plays are highly recommended, as this light volume support is likely to give way. Coffee has fallen below price support and is in a bear trend despite long term bullish fundamentals. In this market I recommend dollar averaging into bull call spreads on the way down (July), and buying OTM puts about 10-15 points out (May) as protection. Cocoa has rallied significantly through price resistance as swollen shoot virus and chaos in the Ivory Coast cause a debate over future production estimates. Cotton reversed its bullish momentum and sold off heavily through support this week as it led up to Friday’s USDA numbers. Overall the market is choppy but remains a sell. Lumber has built a solid short term support and is worth consideration as part of the portfolio with long call plays. Sugar has little to offer in the way of bullish technicals, but this market has a long history of short term fake outs. Even on a weekly chart it is a sell and puts are dirt cheap. Long strangles, with volatility premium this low, are highly recommended.

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.