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Dennis Gartman: 'I Have Trimmed Commodity Positions, Materially'

Monday, 9 May 2011 | 6:18 PM ET

The S&P closed higher on Monday with commodity-related shares rebounding after last week’s collapse.

Energy and materials led the charge as investors went bottom fishing and gobbled up stocks that had recently taken a beating.

Commodity related stocks – as well as most of the S&P - have traded in a pattern over recent months – with a sell-off usually followed by a bounce.

Considering Monday's market action, should you bet the commodity rout is over and more gains lie ahead? Or was this just a one day bounce?

Word on the Street
Oil prices roar back from a rout as the CRB Commodities Index climbs the most it has in 8 weeks. Also, a look at Caterpillar and McDonald's, and how markets in China are faring, with CNBC's Melissa Lee and the Fast Money traders.

Instant Insights with the Fast Money traders

Startegic investor and CNBC Contributor Dennis Gartman tells us, "I have trimmed commodity positions materially." When asked to elaborate he says, "A lot. Almost all."

With QE2 winding down and more financial woes surfacing in Europe, Gartman expects declines in the US dollar are over.

"If the dollar gets stronger commodity prices get weak," he reminds. ”Where it was easy to own crude oil or be bullish of the grains, it’s much less easy now.”

Trader Tim Seymour also points to the dollar as a potential headwind for commodities. “After QE2 ends, I think the dollar has got a huge spring underneath it,” he says. “And I don’t think it’s something people are pricing in.”

Trader Steve Cortes is even more bearish on commodities. He thinks we're in the early innings of a massive down move.

“When you have the kind of violent selling like we had last week, that’s not a two or three day event,” he says. “I think it takes weeks and maybe even months to run its course,” he explains.

If you're looking for some trading ideas, Cortes thinks retailers are a buy as a bet crude declines sharply. “Crude oil coming down should be a huge boon for middle to lower end of the market. Look at Walmart and Target ,” he says.

But that's not to say all the Fast Money traders agree on this point. They don't.

Pete Najarian is optimistic that after last week’s sell-off, commodity prices may be finding a base, “especially in oil and silver,” he says. Recent options action suggests to Najarian that “some folks are starting to say enough is enough - that maybe we’ve reached the lower end – and at least we’re going to pause on the downside.”

Najarian suggests seeking out names that were over-punished last week. “Conoco Phillips really took a bath,” he says. “And look over at Valero and Tesoro .”

Steve Grasso largely agrees with Najarian. Looking at silver’s headline making sell-off he says, “From here, I’d be betting on higher prices in silver.” And as for the space broadly, he adds, “I don’t think the commodity play is over just yet.”

Zach Karabell thinks the sharp swings from high to low will characterize the commodity trade for quite some time. “Lows points like this are when you get in. Then after the run, get out,” he counsels.

Karen Finerman thinks Ensco is worth a look, "though I’m not inclined to be a buyer right at this time."


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LOVIN’ THE MCECONOMY

McDonalds led the Dow higher on Monday after the fast food giant reported that its global same-store sales rose 6% in April.

What's the trade?

Pete Najarian likes this stock. "McDonald's is executing on all phases. And you get a 3% dividend yield."

Karen Finerman is also bullish. "I don't think it's expensive, even here," she says. (She's also bullish Yum! .)

Zach Karabell isn't as enthusiastic. "Since November McDonald's stock has been bound between $75 - $85," he says. I don’t think it’s going to be a $100 stock in 6 months. I’d rather be in a stock like Starbucks, which has greater pricing power.

Steve Cortes is somewhere in the middle. "Not a ton of fireworks to the upside," he admits, "but also not a lot of downside in a market that I think is incredibly dangerous."






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Trader disclosure: On May 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; 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; Cortes owns (EXC); Cortes owns (SO); Cortes owns (TGT); Cortes owns (K); Cortes owns (KFT); Cortes is short Nasdaq futures; Cortes is short EEM vs S&P long; Cortes is short EUR vs USD and CHF; Seymour owns (AA); Seymour owns (AAPL); Seymour owns (F); Seymour owns (POT); Seymour owns (SLW)

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 Ed Najarian
ISI does and seeks to do business with BAC, C, WFC
ISI research analysts received non-investment banking compensation from a major bank in the past 12-months

For Mike Khouw
**No Disclosures


CNBC.com and wires

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COP
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ESV
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SBUX
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TGT
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TSO
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VLO
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WMT
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SPDR MAT SEL
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SPDR NRG SEL
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YUM
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MCD
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