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Is the Commodity Bull Trying to Tell You It's Tired?

On Tuesday, the S&P 500 closed lower for a second consecutive day with investors wondering if commodities were about to drag down the market in a big way.

Perhaps of greatest consequence was the sharp sell-off, in silver which suffered its biggest two-day loss since 1987, after flirting with $50 an ounce just days ago.

Also, oil prices dropped with Brent Crude breaking under the 20-day moving average, a key level that had helped support prices since November.

Has the commodities trade become seriously overheated?

Instant Insights with the Fast Money traders?

Trader Guy Adami is concerned by the moves in silver. He says “the speculative juice behind the silver trade is gone. The easy long money is done.” Although he remains bullish in the long-term, in the near term he cautions investors that going forward, “the volatility will chop you up. It will be painful to trade silver day by day.”

Energy trader Joe Terranova largely agrees. He says in silver as well as oil and gold "momentum has reversed. It’s tilted down.” However Terranova doesn’t think you should run for the exits. Quite the opposite, Terranova thinks the weakness was triggered by reallocation and not a change in fundamentals. "However if you're playing the space in an overweight capacity you should reduce your holdings," he counsels.

Trader Brian Kelly is on the other side of the silver argument He feels the fundamentals are very much in place. He suggests playing it longSIL .

Zach Karabell agrees with Kelly. “It's too early to call the end of the silver trade. It’s been such a sharp sell-off; we could easily have a similar shift to the upside a week later,” he says.

Peter Schiff of EuroPacific Capital thinks the current sell-off in silver is a buying opportunity here and now - and not only for long-term investors but also for Fast Money traders. “I don’t think there’s a lot left to this correction,” he says.

In fact, Schiff’s thesis would suggest the entire commodities trade remains in tact.

”The dollar is making new lows and the gold is climbing,” he explains. If we were looking at a turnaround in commodities, the exact opposite would be happening,” he says.

John Stephenson of First Asset Investment Management, and author of "The Little Book Of Commodity Investing" agrees with Schiff. He doesn’t think the sell-off will last much longer. And he likes playing the space with the SLV as well as Goldcorp, Minefinders and Gammon Gold .




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Trader disclosure: On May 4, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Finerman and Finerman's firm own (AAPL); Finerman and Finerman's firm own (BP); Finerman owns (C); Finreman and Finerman's firm own (CVS); Finerman's firm owns (IBM); Finerman's firm owns (JPM) and is long (JPM) leaps; Finerman owns (JPM); Finerman and Finerman's firm own (MSFT); Finerman's firm owns (TGT); Finerman owns (UNG); Finerman owns (USO); Finerman's firm is short (IWM), (SPY), (MDY); Finerman's firm owns s&p puts; Finerman's firm owns Russel 200 puts; Terranova owns (XOM); Terranova owns (BAX); Terranova owns (SLV); Terranova owns (TCK); Terranova owns (APA); Terranova owns (HOC); Terranova owns (OXY); Terranova owns (UPL); Terranova owns (FCX); Terranova owns (BX); Terranova owns (V); Terranova owns (VRTS); Terranova owns (JPM); Terranova is short (NFLX); Terranova is short S&P Futures; Terranova is Chief Market Strategist of Virtus Investment Partners, LTD; Karabell owns (AAPL); Karabell owns (EMC); Karabell owns (GS); Karabell owns (IBM); Karabell owns (GOOG); Karabell owns (GE); Karabell owns (POT)

For Brian Kelly
Accounts Managed by Brian Kelly Capital own (EBAY)
Accounts Managed by Brian Kelly Capital own (GLD)
Accounts Managed by Brian Kelly Capital own (SLV)
Accounts Managed by Brian Kelly Capital own (DIA)
Accounts Managed by Brian Kelly Capital are long gold, natural gas

For Zachary Karabell
River Twice Capital owns (EMC), (GS), (IBM), (JCI), (SBUX), (POT), (QCOM)
River Twice Capital is short (AA) calls in fund
River Twice Capital is short (XLF), (SPY), (SMH)

For Joe Terranova
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 (NRCI)
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 (XLF)
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 DOMINO'S PIZZA UK &
URL PLC
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Peter Shiff
Schiff Owns Gold
Schiff Owns Silver

For Colin Langan
(GM) Is Or In Past 12 Months Has Been An Investment Banking Client Of UBS Securities LLC
(GM) Is Or In Past 12 Months Has Been A Non-Investment Banking Client Of UBS Securities LLC (Securities-Related Services, Non-Securities Services)
UBS Securities LLC Has Received Compensation From (GM) In Past 12 Months

For John Stephenson
**No Disclosures

For Whitney Tilson
Funds Managed by Whitney Tilson are Short St. Joe (JOE)
Funds Managed by Whitney Tilson own Berkshire Hathaway Shares
Funds Managed by Whitney Tilson are long Howard Hughes Corporation (HHC)



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