Copper futures appear to have lost their battle at the $4.00 level and the market has been selling off the last couple weeks. On Wednesday, July copper futures dropped 5.00 cents to close at $3.6810. This is probably more of a technical break, but the fundamental explanation is tied to worries about slowing demand for copper in China.

I wouldn't rush in to buy this market anytime soon. Usually, commodities will have a steep drop under a technical setup like this. I would only look at the buy side if copper futures are able to trade back above $4.00. The next level of major support should come around $3.45.

The commodities that have been the market leaders over the last couple months ended mostly lower on Monday. Crude oil dropped $1.73 and may be in for a bit of a sentiment change. It looks like demand could drop from China and India, which may put a screeching halt to the rally in crude oil futures if it becomes a reality.

India’s latest economic numbers show their economy might be growing slower than expected. Also, there is a serious inflation problem in China and measures may need to be taken to slow the economy and fight inflation. Much of the increased world demand for oil has come from the two economies.

Corn and soybean futures ended the day lower. The latest weather forecasts are now indicating drier weather ahead and farmers should be able to catch up on their plantings. However, the USDA released the latest Crop Progress figures Monday at 4:00 EST. The report showed corn is 51 percent planted thus far, compared to the five-year average of 77 percent for this time of year. I have to believe chances are looking better for below average yields this season, since the crops are so far behind schedule.

The soft commodities were moderately higher today. Cotton, sugar, cocoa and coffee all had small gains. Silver futures broke out of a small consolidation pattern, which was a nice pop for a quick profit.

The last week of trading was largely dominated by the grains and the energy commodities. Crude oil continues to make record highs, while supplies continue to tighten for corn and soybeans.

Crude oil futures tacked on another record high on Wednesday, closing at $123.57. The Energy Department released the weekly inventory numbers on Wednesday morning, which showed a sharp rise in crude oil inventories. Supplies rose 5.65 million barrels above last weeks numbers. This is the second week in a row where supplies have risen more than expected.

So, why does crude oil continue to move higher in light of increasing supplies? The Labor Department released the productivity numbers, which were stronger than expected. Some believe this points to an improving or stronger economy. That is a stretch in my opinion. Marginal increases in productivity will help quarterly profits and maybe spur a slight economic expansion, but it is not a barometer of an improving economy. In reality, businesses have been finding more ways to squeeze out productivity, since the economy has been stagnant for quite some time.

The extended move in crude oil has entered the euphoria phase. With Goldman Sachs talking about $200 a barrel oil, that was enough to ignite a new wave of buying. It also scared away a lot of would-be sellers. Sentiment has to change for this market to change direction. There will have to be some catalyst to do that. The long-term picture looks good, but its hard to justify prices this high when supplies are still readily available.

The trend is still strongly higher and it is not something I want to fight. Expect some solid resistance between $123 and $125. A break through there means a quick test of $130 and we will be seeing a runaway market. For those who want to short this market, patience is probably the best course for you. Wait until sentiment starts to shift and crude oil becomes out of favor. A break of $110 could open the floodgates.

The USDA released their weekly Crop Progress report Monday afternoon. The figures as of May 4th, show 27 percent of the corn crop has been planted. This compares to the five-year average of 59 percent for this time of year and 45 percent in 2007. Traders were expecting the numbers to come in between 25 and 30 percent, so there wasn’t a big surprise here. However, the corn crops are well behind schedule and may be subject to lower yields this season – something this market can’t afford.

The soybean crops are 5 percent planted, compared to the five-year average of 14 percent. This is not a big concern yet for soybeans. The bigger concern deals with some farmers deciding to plant soybeans instead of corn if they can’t get the corn in the ground on time.

Crude oil continued to snap back sharply again today after the quick correction last week. June crude oil futures hit new highs above $120, but settled just below that level. It is amazing how quick the corrections have been in oil, which is a sign of a very strong market. There should be stiff resistance at $123 to $125.

There is a lot to digest from this last week of commodities trading. The most important issue to ponder could be whether the trend of the dollar has changed. The dollar formed some type of bottom, but how do you tell if it is a bounce or a long-term bottom - and how will this impact commodities?

Crude oil will get an influx of data today that could set its course of direction. The EIA weekly petroleum inventories will be released this morning. Analysts are expecting an increase of 950,000 barrels. We should start to see an increase in inventories as we now know that demand for crude oil has dropped an unexpected 7 percent.

The Fed will decide today whether they will lower interest rates and their language could be even more important. The market is expecting a 25 basis point cut and a noted end to rate cuts for the near future. This would help support a rebounding dollar, which would put pressure on crude oil.

Crude oil futures had a severe sell-off on Tuesday and the charts are looking like a top may be in. To confirm this, we should see some strong follow through to the downside relatively quickly. If demand is truly 7 percent lower and the dollar continues moving higher, it is a likely bet that we will see lower prices in crude oil in the coming months.

Corn futures shot 22.75 cents higher on Monday. Wet and cold weather across the Midwest has delayed planting of the corn crops and yields could drop substantially this season. It will be critical to monitor the weather reports for the Midwest in the next couple weeks as well as the USDA crop progress reports that are released each Monday.

The USDA Crop Progress report released this Monday stated that only 10 percent of the corn crop has been planted as of April 27. The five-year average for this time of year is 35 percent. It is critical for the corn crop to get planted by at least mid-May. It is even better to have it planted before the end of April.

Yields can drop dramatically if the crops are not mature enough to withstand the summer heat, especially during the critical pollination stage in July. If we see prolonged heat and dryness in July (especially temperatures in the high 90’s or 100’s), the crop losses could be severe. That could cause corn futures prices to move much higher.

Commodities have shown some weakness in the last week or two. There are a few reasons you can attach to the lackluster trade, but it is still a tough call whether this is a consolidation before commodity prices start another leg higher or we have completed a retracement from the March sell-off and prices will head even lower.

As rice futures surpass $25 in overnight trade, a chain of events has been unfolding around the world that that paints an ominous picture for consumers and huge opportunities for commodity traders.

Rice is one of the world’s top food staples and as supplies have tightened, a “get it now or its too late” mentality has set in. Riots have taken place in many countries, as citizens cannot afford to pay 100 to 200 percent higher prices for rice. Even worse, many countries are curtailing or eliminating exports of rice, which leads to even less supplies on the world market. Countries that rely on importing rice as feeling the most pain.

The U.S. is not running a shortage of rice as we are a major exporter, but that could change soon as a hoarding mentality could take a lot of supplies off the market in a short period of time. Sam’s Club has limited the purchases of rice by customers, because some greedy individuals want to accumulate supplies out of fear that one day there will be no more rice to buy.

The situation in the rice market could get worse as everyone tries to protect their supplies, which leads to less supplies to go around. You can use this situation as a blueprint for supply shocks in other commodities in the year’s ahead where prices can move exponentially higher. We could easily see the same situation with corn and soybeans this summer if extreme weather develops during the growing season and crop yields drop.