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Did Gold Bubble Just Pop? Gartman Says, 'No!'

Friday, 7 Jan 2011 | 6:16 PM ET

The traders are closely watching the action in gold, which sold off sharply this week breaking below its December low of $1360 on Friday before recovering some of those losses.

As Guy Adami likes to say gold takes the stairs up and the elevator down and we’re certainly seeing those kinds of sharp moves lower right now.

The spot price of gold closed in negative territory on Friday for a fifth consecutive day, its longest losing streak in seven months. The precious metal is now down about 4% on the week.

On the charts, gold has breached below two important support levels, namely its 50-day average at $1,382 and – as we mentioned above - its December lows at the $1,360s, explains Adam Sarhan, chief executive of New York-based Sarhan Capital in a Reuters interview.

"At this stage of the game, gold is at a very important inflection point,” Sarhan says. How should you position. What should you expect?

For insights CNBC's Fast Money turned to one of the most followed and esteemed commodity traders in the nation, Dennis Gartman, author of The Gartman Letter.

Commodity Bubble Pop This Week?
The lows in commodities is a much needed and sever correction, says Dennis Gartman, The Gartman Letter.

He tells us all the excitement about the declines is a lot of tempest in a pot of tea.

”Gold moved from $1430 to $1365 and everyone is screaming how serious the gold decline is. But if a stock went from $14.30 to $13.65 would they be as excited? No. But it’s the same percentage move.”

That’s not to say Gartman thinks declines are over. He doesn’t. “Can gold go down more? Can it go down to $1325. Certainly it can,” he says.

As you might remember on Monday’s Halftime report Gartman said the the downtrend in gold could last through much of January.

”It creates fear in the longs and joy in the people who are short,” and as a result it generates short-term momentum to the downside. “I wouldn’t be surprised (to see) the correction last 2 or 3 weeks.”

But at the end of the day what Gartman thinks matters most is that gold has been moving from the lower left to the upper right for over a decade.

”Do I think the bull market in gold has ended? Not really,” Gartman concludes.

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OIL SERVICES ACTION

A few oil service stocks ended the week as big winners after Goldman Sachs added Diamond Offshore to the 'Conviction Buy List' and after the firm upgraded Baker Hughes to 'Buy'.

What’s the trade?

If you believe oil prices will move from where they are to modestly higher through the end of the year then Oil Services is the place to be, counsels Joe Terranova.

It's important to understand part of the Goldman upgrade was predicted on the thesis that the two stocks mentioned above had underperformed and they're betting on a game of catch up, reminds Guy Adami., I don’t like to play stocks for that reason – usually there’s a reason they’ve underperformed.

In the space I like Rowan and I also like DryShips , says Brian Kelly.

Read More:
> String of Catalysts to Move Energy Stocks

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CHIP STOCKS

Chip stocks were also big winners this week with Nvidia and ARM Holdings both hitting new 52 week highs after tech companies premiered a flurry of new devices and gadgets the Consumer Electronic Show.

What’s the trade?

If you want to play the space be careful of Intel, says Guy Adami. My sense is that the stock is due for a slide. I’d rather own Qualcomm at current levels. That stock seems like it’s breaking out.

I took profits in Qualcomm, but I’d be a buyer again on dips, adds Brian Kelly.

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VERIZON IPHONE

Again the Street is buzzing about a Verizon iPhone after Verizon said it will host a special event this Tuesday in New York.

What’s the trade?

I'd expect to see Apple pop on the news but the question becomes can Apple sustain the pop, says Joe Terranova.

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THE ONION INDICATOR

The price of onions in India has doubled over the last year, due to weak harvests and supply disruptions.

How does this impact US investors?

It’s a good data point that illustrates the trend in food inflation and why Mosaic and Potash continue to be attractive, says Simon Baker.




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Trader disclosure: On January 7th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AA); Seymour owns (AAPL); Seymour owns (BAC); Seymour owns (DRYS); Seymour owns (F); Seymour owns (FXI); Seymour is short (MOS); Seymour is short (POT);
Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Adami's wife works at (MRK); Terranova owns (GM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (PEP); Terranova owns (OXY); Terranova owns (GS); Terranova owns (LTD); Terranova owns (GLD) puts; Terranova owns (SLV) puts; Terranova owns (FCX) puts

For Brian Kelly
Accounts Managed by Kanundrum Capital Own (DRYS)
Accounts Managed by Kanundrum Capital Own (FCX)
Accounts Managed by Kanundrum Capital Own (GLD)
Accounts Managed by Kanundrum Capital Own (MCP)
Accounts Managed by Kanundrum Capital Are Long USD
Accounts Managed by Kanundrum Capital Own (TBT)
Accounts Managed by Kanundrum Capital Are Short The Euro
Accounts Managed by Kanundrum Capital Are Short The Yen
Accounts Managed by Kanundrum Capital Are Short (XLF)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (CLB)

For Simon Baker
Baker And Baker Avenue Asset Management Own (AAPL)
Baker And Baker Avenue Asset Management Own (C)
Baker And Baker Avenue Asset Management Own (FCX)
Baker And Baker Avenue Asset Management Own (FFIV)
Baker And Baker Avenue Asset Management Own (GDXJ)
Baker And Baker Avenue Asset Management Own (GLD)
Baker And Baker Avenue Asset Management Own (IBM)
Baker And Baker Avenue Asset Management Own (ILMN)
Baker And Baker Avenue Asset Management Own (IWM)
Baker And Baker Avenue Asset Management Own (SNDK)
Baker And Baker Avenue Asset Management Own (SLV)

For Dennis Gartman
Funds managed by Dennis Gartman are long the Canadian Dollar
Funds managed by Dennis Gartman are short Yen
Funds managed by Dennis Gartman are long gold
Funds managed by Dennis Gartman are long Silver
Funds managed by Dennis Gartman are short Sterling
Funds managed by Dennis Gartman are long March KC Wheat
Funds Managed by Dennis Gartman are long Soybeans
Funds managed by Dennis Gartman are short Euro

Dennis Gartman SOT
Funds Managed by Dennis Gartman were long Gold on 1/4/2011

For Louis Navellier
Navellier Owns (BWA), (ILMN), (FFIV) In Managed Accounts
Funds Managed By Navellier Own (BWA), (ILMN), (FFIV)
Navellier Invests In His Funds

For Zachary Karabell
Karabell owns (AAPL)
Karabell owns (COH)
River Twice Capital owns (IBM)

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NBC Universal is the parent company of CNBC


CNBC.com and wires

  Price   Change %Change
ARM
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BHI
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DO
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DRYS
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INTC
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MOS
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NVDA
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POT
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QCOM
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RDC
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VZ
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AAPL
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MV SEMI
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