Copper Telling You China Much Worse Off Than You Think?

In a volatile market like this one, you can’t afford not to examine every development. And this one isn’t good.

In fact, if you’re bullish it’s kind of a one – two punch to the gut.

On Wednesday, materials led the market lower as investors worried the crisis in Europe could catapult the world into global recession. Considering materials propelled the market to bull market highs earlier in the year, the poor action in this sector is particularly worrisome.

However, that’s not the worst of it.

Our pros were more concerned about the action in copper sometimes referred to as Dr. Copper because its moves can often be used to diagnose the health of the market.

And Dr Copper’s prescription is painful. The red metal plunged Wednesday on high volume.

To make matters that much worse, the Shanghai composite closed at the lowest level of 2011. That’s negative because the world’s second largest economy is largely viewed as a driver of global demand because it needs to build so a vast amount of infrastructure.

According to Tim Seymour the market could be receiving a serious warning. “Copper is a real barometer and it suggests China may be much worse off than people think,” he says. “There are construction problems and a property bust in Asia,” he reminds. Those woes may be coming home to roost.

Trader Guy Adami agrees. “China’s markets have been telegraphing this for a while – it shouldn’t come as a surprise,” he says.

Joe Terranova is largely on the other side. Although he concedes that the decline in copper is serious, he thinks it presents opportunity. “I think there’s still demand in emerging markets – and the supply structure in copper borders on deficit.”

Kevin Kerr of Kerr Trading International sides with Terranova. He says after the parabolic drop in copper he now expects the prices to stabilize. “The China story is far from dead. Growth should come from China for a long time to come.” As a result he thinks XLB is a buy.

What do you think? We want to know!

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Trader disclosure: On Sep 28, 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); Terranova is long VRTS; Terranova is long OXY; Terranova is long HOS; Terranova is long OIH; Terranova is long CVI; Terranova is long AXP; Terranova is long EMC; Terranova is long F; Terranova is long AMZN; Terranova is long WFC; Terranova is long AAPL; Terranova is long IBM; Terranova is long Silver puts; Terranova is long PCP; Terranova is long MS; Terranova is long GS; Terranova is long WFM; Grasso owns AKS; Grasso owns AMD; Grasso owns ASTM; Grasso owns BA; Grasso owns BAC; Grasso owns C; Grasso owns D; Grasso owns JPM; Grasso owns LIT; Grasso owns LPX; Grasso owns MAR; Grasso owns MHY; Grasso owns NDAQ; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XHB; Grasso owns XLB; Grasso owns XLI

For Steve Grasso
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For Kevin Kerr
Kerr is long XLB ETF Options
Kerr is long GLD ETF Options

For Jim Iuorio
Iuorio is long TBT
Iuorio is long TBT (calls)

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