Market pros were taking a hard look at the price spike in nat gas Wednesday, with energy bulls hoping the commodity might be finally breaking out. But according to commodities trader Rich Ilczyszyn, the energy bulls are going to be disappointed.
“I don’t think I would read too much into nat gas specifically at this price,” he said. “This is the end of a contract spike. Somebody’s getting out of a position.”
That spike appeared to be the one positive in commodities action Wednesday. Commodities slid after China reported weaker factory growth and a near flop of a German bond sale raised concerns that the debt crisis was threatening Europe’s biggest economy.
JPMorgan also downgraded commodities to underweight, saying policy failures in the U.S. and Europe had darkened the outlook for the next six months.
While Ilczyszyn agreed we’re seeing a de-levering, he also sees a buying opportunity down the road.
“Obviously the market has taken a hit today, it’s anti-risk,” he said. “I think it’s good investors that are not in the market right now. Be patient, wait and buy at key levels, but I think this is going to be an extraordinary buying opportunity.”
So where is that opportunity? Ilczyszyn said he’s looking a diesel and crude.
“Although [China’s] industrial space maybe pulls back, they’re still expanding. The average person is getting into car and they still have to eat,” he said. “So you have to be selective. Maybe you don’t take the broad stroke with commodities in an index but you zero in on targets.”
Fast trader Zach Karabell agrees. He thinks China’s low PMI is a reflection of European weakness and although it slipped, it still shows an eight to ten percent expansion.
“You have this domestic demand driver in China and this hunger because they are still importing a huge number of commodities,” he said. “I’m not going to treat this one PMI reading, based on European weakness, as a negative.”
But trader Steve Cortes thinks the emerging markets story is unraveling.
“They are not emerging markets, they are submerging markets,” he said. “The commodity trade is predicated upon breakneck growth in the emerging markets. At best we’re going to get good growth in the emerging markets. I suspect even less than that.”
And that, he added, is not enough to support $100 oil. He thinks it could dip to the low $80s.
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Trader disclosure: On Nov. 23, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Karabell is long APL; Karabell is long MS; Karabell is long IBM; Karabell is long GOOG; Karabell is long ORCL; Karabell is long CAT; Karabell is long JOYG
For Zach Karabell
Rivertwice is short XLF
Rivertwice is short SMH
Rivertwice is long IBM
Rivertwice has long calls HPQ
Rivertwice is long QCOM
Rivertwice is long ORCL
Rivertwice is long DE
For Josh Brown
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For James Lebenthal
Lebenthal is long C
Lebenthal is long XLF
Lebenthal is long MPC
Lebenthal is long CAT
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For Colin Gillis
BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report (AMZN).
BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report (AAPL).
For Adam Fleck
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For Rich Ilczyszyn
CNBC.com with wires.