Energies
Energies exhibited weakness all week long as a half-hearted OPEC meeting and a benign inventory report created a bearish and toppy tone to the market. Cold weather heading into the northeast offered some support, but ultimately this market topped out below the previous channel and is likely to see some significant selling pressure moving forward. OPEC’s meeting provided little to the market in the way of price direction, as the ‘we’re fine for now with $60 oil, but ready to cut 700,000 barrels if we get a major price drop’ pitch gave the market nothing to care about. The bottom line is the market is still waiting for OPEC nations to comply with previous cuts to bring production down, so what good would additional cuts be? Decaying volatility has left us premium collectors with profitable sold calls, but little opportunity to sell additional premium. Do not get caught selling premium in low volatility in this market, but rather wait for a volatility spike beforehand.



Financials
Stocks remained volatile this week, but showed its true inclination to selloff with more ferocity than it could muster a rally. The 1431.25 high following the China meltdown is a key price point that is unlikely to be penetrated. Stocks have a big hill to climb to recover and I do not see a fundamental or technical reason to expect higher prices anytime soon. Bonds have likely set it’s high and low for the first six months of 2007 and I suspect they are locked in range bound trade without a major interest policy shift.

The dollar weakness today was sparked by Greenspan housing fears, but the irony is that the weak dollar is the main reason for the housing problems we face. Even more ironic than that is that it may very well be the reason the housing market supports out at this point because the weaker dollar will keep foreign investment coming in to scoop up real estate at a value because their respective currencies make our real estate seem dirt cheap. Nevertheless, 82.70 and 82.00 remain critical support levels and the dollar is unlikely to fail significantly further at this point in time. The Canadian dollar is worth looking at for a long volatility play because the premiums, at least what little premiums that were left, have all but evaporated which makes strangles dirt cheap. On the opposite end of the spectrum, take a look at selling a 139 call and 128 put for June in the euro currency for about $550-$600.

Grains
Choppy and weak trade in the grains this week came to a near comatose standstill for much of the day today, as pitiful light volume capped a forgettable week. Everyone seems to be talking about a reversal in seasonal weather forecasts that now suggest more wet and rainy weather than farmers could handle, pushing planting out further than one would want for ideal conditions. Show me a consistently accurate forecast for precipitation levels more than a few days out in time and I will show you pigs flying and peace on Earth.

Meats
So it took a mega breakout to create a major sell structure in meats, or maybe we are just staring at another fakeout? I remain a step away from pulling cattle out of my newsletter and portfolio altogether and yet find myself addictively scooping up puts upon puts for the meltdown that seems like it will never come. Hogs and bellies should continue their downward spiral, but look for a potential bounce early in the week for an entry point as they take a stab at filling the recent gaps in hogs.

Metals
Metals found solid price support this week as the stock market stabilized somewhat and the dollar offered some weakness. After silver plunged 15% in a week and gold about 8% lower I suspect a bounce back of some sorts is likely, albeit short lived. Overall the continued weakness of the stock market and the support of the dollar will ultimately create more selling pressure in metals.

Softs
Coffee experienced consistent selling pressure in light volume this week as funds cleared out of longs due to large exports from Central America and have spooked traders into believing the supply side of the market will be abundant. This is an ideal time to enter the market as pre-Brazilian crop and value pricing create a good time and price combination ahead of a test of critical 104.20/102/100 support levels. OJ choppiness is likely to expand into true market volatility as the longer it stays range bound at these price extremes the more likely it is to explode out of the congestion.

Sugar’s stiff decline could be linked to a plethora of fundamental and intermarket correlated events, but the gut says it is low volume selling that is about to be reversed next week. Look for 998 to hold as a low target on the May contract and for a surge to about 1080 in the next two weeks. Cotton is showing some bullish indicators but needs a break and close above 58 on the May contract to get me excited. A market like this, that has been dead for so long, will have plenty of opportunities to ride the bull bandwagon when the cyclical turn occurs, so why jump the gun and get caught in the chop? Cocoa is stuck below key 1815 and 1855 resistance and has been a great day and/or swing trade short with an entry around 1780-1795 and a stop above 1855 (profit targets around 1755 on a day trading basis and 1732 on a swing basis should pay out). Lumber is seeing some selling pressure after private analysts have forecasted an oversupply situation – a real shocker (enter sarcastic tone here) given the state of the housing market. However, buying around 250 and selling around 400 has worked almost every time for over a decade, so why stop now?

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.