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SPECIAL REPORT: Oil Reversal May Be Imminent

Wednesday, 16 Jul 2008 | 10:35 PM ET

Oil prices fell below $130 a barrel for the first time in more than a month Thursday, as the dramatic slide entered its third day along with a sharp sell-off in natural gas.

As global demand for oil slows, supply should build. Does that mean the energy bull has run its course?

Basically, yes, according to Steve Cortes, founder of Veracruz Research.

“The energy trade has really been sold to the investing world as a play on emerging markets due to supposedly insatiable demand for crude and other resources from Asia," Cortes tells Fast Money.

"But India and China and other Asian markets are trading disastrously; down nearly 50% for the year. In my view that story doesn't hold water any longer!”

In other words, from '02 - '07 emerging markets traded in tandem with the energy sector. But in the beginning of this year emerging markets broke down while energy traded higher. Cortes expects the two are now aligning themselves again, with energy going lower.

And he’s putting his money where his mouth is.

“I’m short the XLE ,” he says “the price action in the energy sector is very troubling and I’m looking to sell more.”






To see the complete interview with Steve Cortes please watch the Word on the Street video below. The interview begins approximately 14 minutes in.

Word on the Street
The Fast Money guys take a look at today's top business stories.

















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Trader disclosure: On July 16, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (GS), (MSFT), (USO), (WMT); Adami Owns (C), (AGU), (GS), (INTC), (NUE), (BTU), (MSFT); Najarian Owns (AAPL), (NOK), (TSO), (XLF), (GS); Najarian Owns (ANR) Puts; Najarian Owns (CSCO) Calls, (PRU) Calls, (SLB) Calls, (UYG) Calls, (YHOO) Calls; (WLT) Calls; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (NOK), (SUN), (TSO), (TWX), (VLO), (AXP), (M); Finerman's Firm Owns (TGT) Calls; Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Is Long SPX Index Puts; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM)

Charles Schwab Is A Sponsor Of "Fast Money"

Veracruz LLC Is Short (XLE)

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