Crisis Over: Sell Crude, Buy Stocks?

What a difference a day makes. Instead of rage sweeping across the streets of Cairo on Friday cheers and elation rang out after Hosni Mubarak finally stepped down as Egypt’s president.

On Wall Street the price of oil fell and stocks climbed higher as investors took developments as a signal that turmoil would begin to subside.

"One thing that has weighed on investor sentiment is that the price of oil would go up in the case of political turmoil and Mubarak's leaving reduces that possibility," says Gary Thayer, chief macrostrategist at Wells Fargo in a Reuters interview.

Egypt is not a major oil producer, but the protests had stirred concerns about the possible disruption along the Suez Canal, or that unrest could spread to oil-producing countries in the Middle East.

With Mubarak out, should you sell crude and buy stocks?



Instant Insights with the Fast Money traders

Fast trader Steve Grasso is cautious. He reminds the panel that one of the issues that triggered the unrest was high unemployment. “Unless you see a huge help wanted sign the problem stands.”

Although he concedes the knee jerk reaction to Friday’s headlines are sell crude and buy equities he wouldn’t be surprised to see another reversal.

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Trader Patty Edwards’ is inclined to believe that developments in Egypt are bullish for stocks. “There’s been a close connection between Egypt’s military and the US military,” she says. “I feel like situation is becoming stable.”

And she thinks the price in gold and silver suggest other investors share her view; both pulled back. However, Edwards is also a realist and adds that unless you must put money to work, sit on your hands and let the situation develop. “Until we know more I don’t think investors can trade it with any clarity whatsoever.”

Options trader Pete Najarian is using the Vix as his market ‘tell.’ “It’s been progressively pulling back toward 15, its level before the unrest in Egypt first grabbed headlines.” And that suggests to Najarian that nervousness is coming out of the market; a bullish development.

Shipping analyst Natasha Boyden of Cantor Fitzgerald cautions investors that Mubarak’s resignation is not a reason to bet on tankers. “The military is in control of the canal and has been for a while,” she explains. Right now she’s bearish on both oil tankers and dry bulk shippers, largely due to oversupply.

However she also tell the desk that contango has been growing wider and in the past that environment has generated demand for floating storage which has a positive impact on rates. “Watch the contango,” she says. “If contango stays steep then look at the tanker market.”

And if events leave you itching to play energy, trader Joe Terranova says to play energy equity names, not the spot price of crude. “WTI can’t be trusted for a while,” he says.

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Trader disclosure: On Feb 11, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian owns (F) bonds and calls; Pete Najarian owns (GM); Pete Najarian owns (V) call spreads; Pete Najarian owns (YHOO); Pete Najarian owns (MS); Pete Najarian owns (JPM) call spreads; Pete Najarian owns (C); Pete Najarian owns (BAC) call spreads; Pete Najarian owns (GE); Pete Najarian owns (MU) calls; Pete Najarian owns (AKAM) ; Pete Najarian owns (PEP); Pete Najarian owns (DRYS); Pete Najarian owns (ELX) calls; Terranova owns (VRTS); Terranova owns (C); Terranova owns (UPL); Terranova owns (GM); Terranova owns (PEP); Terranova owns (APA); Terranova owns (CVI); Terranova owns (SU); Terranova owns (CNQ); Grasso owns (ASTM); Grasso owns (BA); Grasso owns (BAC); Grasso owns (BWC); Grasso owns (C); Grasso owns (CSCO); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MT); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST); Grasso owns (S)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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For Patty Edwards
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Edwards owns (SLV) for clients
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Edwards owns (JNJ) for clients
Edwards owns (AAPL) for clients
Edwards owns (VZ) for clients
Edwards owns (MSFT) for clients
Edwards owns (C) for clients
Edwards owns (SYT) for clients
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Edwards owns (GE) for clients
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Edwards owns (PEP) for clients
Edwards owns (WFMI) for clients
Edwards owns (CME) for clients
Edwards owns (TAL) for clients
Edwards owns (FXI) for clients

For Steve Grasso:
Stuart Frankel & Co and its partners own (ABX)
Stuart Frankel & Co and its partners own (ABT)
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Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
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Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)
Stuart Frankel & Co and its partners are short (TIF)

GUY LEBAS
Janney Montgomery Scott Makes A Market In High-Yield Bonds Of Various Issuers

NATASHA BOYDEN
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Cantor Fitzgerald and/or its affiliates is a market maker in (SB)
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