Energies
Not much has changed in the energy sector from last week so I will keep the outlook the same. Continued strength in oil and gas this week came on the heels of yet another bullish inventory report and breakout technicals forcing short covering rallies. This market remains bullish ahead of a confirmation of major supply or demand issues or even the hint of a hurricane. Imagine the bull move that would occur if geopolitical tensions with Iran heat up or a Cat. 4 heads toward the Gulf! Long term I see the energy markets as over priced and capable of a complete collapse, unlike many bulls that believe we are in for a long term supply problem with rising prices forecasted from now until eternity. However, the short term technicals and apparent near term exposure to fundamental problems suggests that this market be bought on dips through the end of August. Keep in mind that if the market does not get a hurricane it will slowly evaporate that premium which could combine with a drop in seasonal demand to setup a massive selloff come September. So stay long for now and buy the dips, but be prepared to turn short in about a month as you will want to be ahead of the seasonal curve.

Some minor price support was seen in natural gas, and overall this market is a great buy at these prices with the current exposure to weather and supply problems.

Financials
"More so than any other decline this year, the current market condition is indicating a major bear move." That quote, from last week's report, was sparked by a slew of technical and fundamental indicators suggesting the meltdown that we all witnessed this week. Sometimes you are right because are just that good and sometimes you are just lucky. Let's just say I'll take the pat on the back regardless of how it came to be. The market is in a tailspin, and the lessons learned from the China meltdown earlier this year suggests that all the short put premium out there is getting bought up in a hurry and the funds are running for the exits. Expect some choppy support next week, as it appears like a good time to draw in some suckers on the bull side, and then watch out.



Bonds surged on the stock market collapse and hit my upside target of a range that I am forecasting to be between 106-110 for the next month or so. This means you should jump on some call selling here - the best premium I have seen in bonds in years. The dollar is showing some support as expected and could easily rocket back up to 83 with little resistance. The euro and pound remain sells and the Canadian is a good place for some put buying. The yen surprised me a bit this week and I would step aside on my bear stance on a break and close above 8550.

Grains
Strong exports have been supporting wheat prices, along with some weather issues and a crop situation that is clearly devastated from frosts and planting issues earlier in the year. Support throughout the grain sector came in this week as shorts took profits in both corn and beans and wheat broke critical 6.50 resistance. September corn closed above the gap from earlier in the week, signaling a reversal to the upside and a price support above 3.16. The market will need some momentum early this week but I suspect this is a potential low in the grains that should be bought and held into harvest.

Meats
Cattle surged this week as supplies are tight and the market is forcing a short covering rally. This places August live cattle near critical resistance below 94.80. If this market closes above that price there is little to stop it from setting fresh contact highs. If that happens then this bear is jumping ship and seeking better opportunities elsewhere. Hogs remain choppy and unlikely to breakout any time soon.

Metals
Dollar strength forced a metals selloff this week, with silver leading the way and gold not far behind. Gold faked a lot of traders out these past couple of weeks with a strong run-up indicating a possible test and break through 700. To me it seemed like a fake out, especially with oil overbought and the dollar testing critical support areas. This past week provided some solid confirmation and I suspect a strong dollar run here will break the bulls' back in metals. Copper diverged and found some support from a solid GDP report, but I remain a put buyer in this market. Platinum remains a sell with stops above the contract highs.

Softs
OJ is seeing some good underlying bids and rising call option prices as a flood of traders are coming into the market to play a hurricane rally. I remain a buyer here. Coffee is seeing choppy trade as the dollar fluctuations and a lack of a frost have this market stuck in a range. Buy up some bull call spreads for December. Sugar gave back some gains to end the week, but remains very bullish in the intermediate term. I suspect a two week flat to down trend will shake a bunch of weak longs out and set the stage for a strong run through 11. Cotton prices have stabilized after giving back much of the gains from its recent surge, but the gut says there is more selling left. Cocoa broke key support on Friday with a gap down open and an ugly long liquidation. Monday will be a critical indicator day, as I remain bullish with an exit if we close below Friday's lows.

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.