Dr. Copper Diagnosing EU Summit Bust?

Thursday, 20 Oct 2011 | 2:13 PM ET

Is Dr. Copper already telling us that the upcoming EU summit is a bust?

The industrial metal was down sharply in mid-day trading Thursday, as investors worried about reports that the EU was split over how to strengthen the euro zone's bailout fund. The high-profile EU summit is set to begin Sunday.

As goes copper , so goes the market, MF Global’s Rich Ilczysyn said. And he thinks the downward slide may just be beginning.

“Copper’s got a line in the sand that all traders are looking at—it’s $3,” he said. “A close below $3 [Thursday]… is going to be negative for everything—NASDAQ , Dow Jones, and the S&P in my opinion.”

Copper also paves the way for silver and gold , according to Ilczysyzn. So if you are trading any of these markets, he said you have to make sure to pay attention to copper.

But the Fast traders were mixed on how to play the gold trade.

Steve Cortes is short gold, and will look to sell more if it breaks $1600. He said those who think of the precious metal as an insurance policy only have to look at Thursday’s market action.

“This is a day when gold is supposed to do well, and instead its getting killed, which I think tips its hand that this is no insurance policy,” he said. “This is a speculative play that you want to be short.”

Copper Prices Slide
Losses in copper are adding to negative sentiment on stocks, with the Fast Money traders.

Phil Pearlman, however, takes the opposite view.

“I want to get long gold specifically, but I want to get long from lower levels,” he said. “So I’m going to let this play out and wait on it.”

That’s because from a global, macro perspective, he thinks gold is a currency pay. But because of market volatility, he’s going to hold off and see if it goes lower.

Rich Ilczysyzn warned those who want to short gold, not to get too short because he thinks this could be a de-levering before the weekend. A close below $1585 re-tests the 200 day moving average, he said.

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Trader disclosure: On Oct 19, 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; Edwards is owns AAPL; Edwards is owns C; Edwards is owns GOOG; Edwards is owns GLD; Edwards is owns AMZN; Edwards is owns QCOM; Edwards is owns MSFT; Edwards is owns V; Edwards is owns EBAY; Edwards is owns PM; Edwards is owns WLT; Edwards is owns LQD; Edwards is owns JNK; Grasso owns AA; Grasso owns AKS; Grasso owns ASTM; Grasso owns BA; Grasso owns BAC; Grasso owns D; Grasso owns KEG; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU; Pearlman is long GLD; Pearlman is INTC; Pearlman is YHOO; Gordon is short AUD/JPY; Gordon is long TLT; Gordon is long UUP

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