Energies
Strength in energies persisted this week as a lead up to OPEC's meeting on Tuesday. The market is concerned about the release of a Bin Laden tape and a series of tropical storm activity potentially heading to the Gulf. Throw in some bullish inventory data and the market is on a serious bull run. This sets up what is perhaps the best short play in this sector since the beginning of the year. The highs set on Thursday offer a key stop point for a short play, recommended with puts as opposed to exposed futures. There are a million trades you can execute in a given day, but the ones with the least risk, fastest and greatest potential return, and best ROI potential are the ones I like the most. Risking under $1 in crude for a $3 ride on the southbound train with a market showing strong potential to hold Thursday's highs is solid play heading into the OPEC meeting. Buying puts offers an even better risk to reward ratio and good leverage as the put premiums will spike solidly on a $3 plunge. Similar plays are recommended in rbob and oil. Natural gas just slammed the call premiums on Friday and is begging for a long call play.

Financials
The stock market took an absolute beating,the worst in four years, on Friday's horrific employment data with the biggest overreaction to a report in a long time! The employment is notorious for being unpredictable and often sees backward revisions greater than the actual original numbers come next month. The market is clearly looking for the economic data to show a recession coming. They are also looking for the Fed to step in. The problem with the employment report is that it normally trails economic data by six months or more and is an indicator that the problem is irreversible and that we are simply too late to do anything about the coming recession. That is doom an gloom if I have ever heard it. This report should be completely ignored. Now that doesn't mean the market will feel similarly, and therefore there is a bit of panic premium that is deservingly in the market until at least the Fed meeting on September 18. I still like selling premium in the S&P by legging into puts on days like Friday and selling calls on bounces.

Bonds have priced in at least a quarter point on September 18, but they really believe we are going to get a half point. The big move on Friday will be erased only if the stock market stabilizes, and with a week of key economic data ahead, the market is unlikely to be stable. I recommend being a premium collector in bonds by legging into short strangles.

The dollar appears to be failing again. I remain a buyer on these dips by shorting the euro and pound. Short the Canadian and avoid the yen.

Grains
Wheat is in a league of its own and is surging on news that Russia, the 5th largest exporter of wheat, is banning exports due to their own supply concerns. Throw in supply issues from the US and Canada (#1 & #2 exporters) and a slew of smaller exporters in supply crunches and you have all the signs of market hysteria. Look for a top when the wheat overnight margins go up considerably, which is not that far away, as this will cause longs to downsize positions similar to when silver spiked to $15.

Corn is having a tough time keeping up with the Jones's bull moves, but I would not count this market out as it is brushing up against some key technicals that could break it out in a hurry. Beans remain a great bull market and is worth some bull call spreads, and rough rice looks like it is about to explode to the upside.

The crop production and supply/demand reports coming out on Wednesday are going to be trend setting for these markets. With volatility at extreme highs, in wheat especially, selling short term premium and buying long term premium could pay out if the reports quiet the market temporarily. Keep an eye on spiking premiums in options heading into the report and you may just get paid handsomely for the risk.

Meats
Important technical patterns developed in cattle and hogs last week. Cattle set up the beginning of a head and shoulders top with a gap down on Friday, offering a strong sell indicator. Hogs continued its recent weakness as expected as this market is not breaking out anytime soon. It is, however, at the lower end of a weekly trend line support and should continue to develop a pennant.

Metals
Dollar weakness, economic panic and a rising energy sector all helped to spike gold and silver for the second week in a row. The gold market officially broke out of its weekly channel, and it is probably worth a low risk/high reward call play just on the technicals. However, the gut is not convinced this move is going to stick. If we close above $720 I will go all in with my long chips, but until then this market is breaking out of a long-term channel and the first breakout is often a fake out. Silver looks strong although it has not recovered entirely from its recent meltdown, and has rallied disproportionately to gold's move. Copper and platinum remain strong sells.

Softs
Coffee has shaken off some bearish momentum and appears set up to make a major bull move. Hurricane Felix damaged some Mexico supplies and word of less than anticipated Brazilian supplies has the market short covering. Bull call spreads remain cheap and a great way to play the potentially epic move ahead. OJ is right at the 50% retracement mark and is overdue for a dead cat bounce. Buying straight calls on the cheap is recommended here. Cocoa is surging higher on disease and general supply concerns. This market is likely to test the highs. Sugar is weak, but the trading that is going on is light volume and the market seems to setting up for a big-time one day price spike to the upside. Buy some calls here for the volatility pop. Cotton is a short-term technical buy with stops at 58.80 on the December contract.



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.