Energies
A very bearish inventory report, the second bear surprise in as many weeks, did little to shock the market downward. Market participants are in the 'how high can it go' mindset and they are leading the market to one of the largest two week rallies in history. Moreover, the market has no technical resistance and little standing in its way to fresh highs on a fundamental level - especially if they are ignoring inventory. While I would typically look for a topping event (a fundamentally bullish event that brings about a spike high top on the psychological premise that all the good news that could be priced in already is - the its as good as it gets syndrome) this market appears so overbought and in such market hysteria that any strong profit taking could start a domino affect. December deep out of the money puts are the place to be. Don't try to be a market timer here, but rather a premium player. By going out in time you will likely get a nice volatility pop in the options a strong price correction.

Financials
Stocks took a beating last week as a the false breakout of a bull pennant setup a reversal and some momentum that is likely to take the S&P to the 1300 area in short order. Bonds held as anticipated as the stock market created support via its inverse relationship that bonds needed in order to remain relatively channeled ahead of future Fed meetings. The dollar is exhibiting strong support and I expect continued upside in coming weeks as pressure on the euro and pound remain significant. The Canadian dollar is caught between rising unemployment and strong commodity exports. Look for the latter to give way and a selloff to ensue. Wait for a break below 9675 for confirmation.



Grains
Concerns over weather hitting some key growing areas helped to support wheat early in the week, but the supply and demand report broke the market below critical support just under $8. Corn also gave indications of a reversal after a topping event (see energies above) may have occurred on Friday. Monday's crop progress is going to be huge! Beans remain exposed on the supply side but will likely get some beneficial plantings from the wet weather in the corn belt. The sector appears to be vacillating back and forth amongst the various big three, toggling for position ahead of the key growing season. However this seems like a setup for a market top right now and a strong selloff in coming weeks. A critical couple of days lay ahead for rice as a break below 2150 sets up a market failure.

Meats
Cattle caught some strong support this week on bullish fundamentals, but I expect a price correction in coming weeks. Hogs are also setup for a solid 6-8% retracement. The meats look ready to breakdown and puts can be bought on the cheap.

Metals
Gold and silver continue to see far stronger price pressure on days of dollar strength than it does support on weak dollar days. This is a sentiment trend shift that shows on a short and intermediate price chart and sets up a quick move in gold to 800. Silver should follow suit. Copper is likely to see pressure as an ugly strike in Chile comes to a close. Platinum remains a sell despite some continued mining issues. A strike in Peru's mining area could become a more prevalent issue for metals then it seems now. Keep a close eye on this moving forward.

Softs
Coffee is choppy as revised Brazilian crop forecasts are way under private outlooks and the dollar gains on the Real. The market remains a strong buy with technical confirmation on a break above 140. Cocoa is showing an exhaustion pattern that may setup a top here, but it is cocoa so pick up some cheap puts as opposed to exposed futures. Cotton remains a buy at these levels and has developed a nice rounding bottom formation. Despite some beneficial rains in Texas to facilitate planting, this market is far too under-planted to pull out on top this year. Look for a strong move higher to keep momentum going. OJ has been virtually untradable lately which is putting volatility premium and spec demand into the option market. A bull call spread or ratio call spread looks good to me. Sugar got a price pop this past week as energies shot up, but don't expect too much follow through.

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.