'Fast Money' Recap: Commodities Shift

Stockpickr Staff

Bear Stearns' (BSC Quote - Cramer on BSC - Stock Picks) takeout by JPMorgan Chase (JPM Quote - Cramer on JPM - Stock Picks) at firesale prices caused turmoil early Monday, but the market recovered somewhat from the early losses. The Dow closed up 0.2%, the S&P 500 was off 0.9%, and the Nasdaq dropped 1.6%.

On CNBC's "Fast Money" TV show, Jeff Macke said it was a historic day. Traders took Bear out and shot it, oil spiked, and gold ramped, he said. He believes the day was bullish overall because the market weathered an absolutely huge storm.

Pete Najarian pointed to a spike in the VIX, or volatility index, to 36%. He said that that kind of volatility was the violent move he'd been looking for. Johnson & Johnson (JNJ Quote - Cramer on JNJ - Stock Picks) and Merck (MRK Quote - Cramer on MRK - Stock Picks) looked great today, he said.

Joe Terranova said he would like to see a strong rally tomorrow, a bullish reception of Visa's initial public offering and strong earnings from Goldman Sachs (GS Quote - Cramer on GS - Stock Picks). Continued upward action would make him much more bullish on the market, he said.

Guy Adami expressed sorrow over the employees at Bear who now face uncertainty and greatly reduced wealth. He said he expects Goldman to beat numbers tomorrow, but he warned viewers of a $3 billion writedown related to exposure to a Chinese industrial bank. Najarian pointed out that the market is pricing in a 10% move on earnings in either direction.

Macke said Goldman looked cleaned out on a technical basis. He said if the world were only technicals, investors would do well to get into Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks). Unfortunately, the fundamentals don't look so good. He would, however, go long Goldman with a tight stop close at $150.

Adami pointed out that not all the banks are toxic. For example, U.S. Bancorp (USB Quote - Cramer on USB - Stock Picks) has very little subprime exposure.

In commodities, Terranova said there was outflow from oil and gold. He predicted a momentum shift in the commodities for the remainder of the month. Adami pointed viewers to Apache (APA Quote - Cramer on APA - Stock Picks) and XTO Energy (XTO Quote - Cramer on XTO - Stock Picks) as plays on the natural gas bull market. Macke said that the big picture looks good for the U.S. Oil Trust (USO Quote - Cramer on USO - Stock Picks) ETF and streetTracks Gold (GLD Quote - Cramer on GLD - Stock Picks).

Terranova said to get a wish list ready, because toward the end of the year commodities will be the story. Najarian suggested that if investors want to get long names like Tesoro (TSO Quote - Cramer on TSO - Stock Picks) and Valero (VLO Quote - Cramer on VLO - Stock Picks), they should buy puts to protect themselves.

The traders spoke with Dennis Gartman, editor of the Gartman Letter, about the day's hectic action. Gartman noted that commodities were up early but gave way at the end of the day. He predicted serious downside in commodities. Terranova said it's better to be long companies that extract and export commodities vs. companies that use commodities. Gartman agreed.

Gartman went on to indicate there may have been a bottom in the financials. He said his fund bought JPMorgan for the first time today. He praised CEO Jamie Dimon for buying Bear for so little.

On tech stocks, Macke pointed out that Intel (INTC Quote - Cramer on INTC - Stock Picks) behaved very well on a tough day.

Najarian pointed out that options action in Burlington Northern Santa Fe (BNI Quote - Cramer on BNI - Stock Picks) and Union Pacific (UNP Quote - Cramer on UNP - Stock Picks) wasn't negative. He said the action was mostly protective of long positions.

Adami said Burlington Northern still works, and he noted upward action in CSX (CSX Quote - Cramer on CSX - Stock Picks).

On Visa's initial public offering this week, Adami said the trade is perceived positively by Wall Street. He'd like to see how it trades before getting involved, he said, but he likes MasterCard (MA Quote - Cramer on MA - Stock Picks).

Macke said investors should close short positions on Lehman. Anytime you have a 50% decline with no specific news to a company, you should close the position. You won, he said.

Zach Karabell, executive vice president and chief economist for Fred Alger Management and The Spectra Funds, joined the traders to discuss the housing and credit crisis. He predicted that the financial crisis, which was built on mortgages, will continue for 12 more months.

Macke predicted that the bottom in the market will look like the apocalypse. He said the Federal Reserve will let another bank die.

Najarian said to keep an eye on mortgage insurers Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks) and Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks). He said there was news that the government may ease capital constraints on the two companies.

On expected action by the Fed tomorrow, William Fleckenstein, author of Greenspan's Bubbles, joined the show to talk about the severity of the credit crisis. Fleckenstein said that the market is only experiencing the beginning of a recession and that the government doesn't understand the root of the problem.

Najarian agreed with Fleckenstein, saying bottom-fishers should buy put protection. Terranova said he's not afraid of Lehman at these levels. Adami said that long-term, Fleckenstein is correct to be bearish but that the market could go up as much as 800 points for a month. Macke agreed that it would be wise to try to find short-term bull markets as the economy continues to get more bearish over the long term.

Trader Radar

Johnson & Johnson traded at more than double its average daily trading volume today.

Carter Worth, chief market technician at Oppenheimer, came on the show to talk about the current correction. He said that it will take much longer for a bull market to emerge. He said that the keys to capitulation are persistent weakness, a definitive new low, a close on a high for the day, and explosive volume. He said of the four, the market only displays persistent weakness, so there isn't much precedent for a rally here.

He also pointed out that the S&P 500 was only slightly below the January low and that with so much bullish sentiment today, there's much more room to go down.

Najarina said he likes price action on IBM (IBM Quote - Cramer on IBM - Stock Picks) and Apple (AAPL Quote - Cramer on AAPL - Stock Picks). Worth said he agrees on IBM, but Apple isn't his thing.

Suze Orman joined the "Fast Money" crew to talk about what the average investor should do in this market. She said investors are so frightened by the news that they're burying their heads in the sand and refusing to look at their statements from their 401(k) plans and their IRAs. She said it is very important to keep on top of investments, maintain a long-term outlook and stay diversified. Those strategies will work, she said. Macke and Najarian agreed.

Final Trade

Macke chose Lehman Brothers. Adami selected Apple. Terranova picked Valero. Najarian plugged Tesoro.

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