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Stocks Fall As Crude Leaps

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STOCKS FALL AS CRUDE LEAPS

The Dow slid on Monday after Kuwait pulled out of a joint venture with Dow Chemical due to the deepening global recession, threatening Dow's planned takeover of Rohm & Haas.

Rising energy shares tempered losses after oil prices rose 6 percent following Israeli air strikes in the Gaza Strip. The third day of fighting came as Israel prepared to launch a possible invasion.

Strategy Session with the Fast Money Traders

Not even Melissa can take a nothing day like this and make it seem worthwhile, bristles Jeff Macke. (Melissa Lee is substituting for Dylan Ratigan)

We had a test of the 50-day moving average on the Dow and S&P and now we need to see if it persists, explains Joe Terranova.

But there are still lots of trades to be had, adds Guy Adami. I like long Target for a trade with a stop at $32.

There are still a lot of unknowns in the market and that’s left the financials flatlining, adds Pete Najarian. And the VIX seems to be finding itself.

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NO FUNDING TO BE FOUND

Shares of Dow Chemical tumbled to their lowest level since 1991 after Kuwait decided to end the planned $17.4 billion joint venture, citing slumping petrochemical sales and the global financial crisis.

Dow had planned to use the proceeds from the joint venture with Kuwait's state-run Petrochemical Industries Co to repay a large part of the debt financing for the $15.3 billion Rohm & Haas acquisition. Dow was to receive $9 billion from the Kuwaiti deal.

The deal falling apart is all about lower oil prices, explains Joe Terranova.

Once Rohm & Hass has a $50 handle I think it’s a buy, says Guy Adami.

I’d take a look at Dow, adds Pete Najarian. I think the trade is the Feb 15 calls against the Feb 17 calls. That way you can limit yourself on a stock that has been unjustly crushed.

We’re getting slapped around by Kuwait, exclaims Jeff Macke. And didn’t we save them 20 years ago!

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MALL STOCKS HIT MARKET

The worst holiday shopping season in decades dragged down retail property owners. Both Simon Property Group and General Growth Properties finished the day in the red.

Go downstream for a trade, says Guy Adami. Look at Acuity a company that makes lighting fixtures for malls. I’d sell it short.

I’d be a buyer of REITs on the pullback, adds Joe Terranova.

Run away! exclaims Jeff Macke. Retailers are gutting sales to make their margins.

I wouldn’t chase the REITs right now, adds Pete Najarian. January is going to be rough.

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MIDDLE EAST TENSION SENDS OIL HIGHER

Oil prices rose more than $2 on Monday amid concern that Israeli attacks on Hamas could disrupt Middle East crude oil supplies and as the dollar weakened.

U.S. light, sweet crude settled up $2.31 at $40.02 a barrel, below earlier highs above $42, with thin post-holiday trade making for a volatile day in the market

We need to get the contango out of the marketplace before oil can make a sustained rally, explains Joe Terranova.

Taking a look at other commodities, gold is making a pennant formation, explains Guy Adami. If we break the pennant to the upside gold could explode higher.

I’d keep an eye on Freeport McMoRan, adds Pete Najarian. There’s a lot of premium on the options. However, it’s a volatile name.

I’m selling all the commodities stocks, bristles Jeff Macke. How low can they go? Lower than you think!

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WHALE WATCHING: KERKORIAN DUMPS ENTIRE FORD STAKE

Billionaire investor Kirk Kerkorian has sold off all of his remaining shares of Ford Motor Co , a spokeswoman for his investment firm, Tracinda Corp, said on Monday.

Tracinda, which briefly ranked as Ford's largest outside investor earlier this year, said in a regulatory filing in October that it had begun working with bankers to sell the 133.5 million shares of the No. 2 U.S. automaker it still held at that time.

It was not immediately clear when Tracinda had completed those remaining sales of Ford stock.

I think GM is going to zero but I don’t know about Ford, muses Guy Adami. However, short term this might be the bottom.

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OPTIONS ACTION: SPECULATORS SWARMING IN ENERGY STOCK

Pete Najarian is seeing unusual options activity in Linn Energy.

Buying in the January 15 calls suggests to Pete Najarian this stock could go higher.

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TAKE YOUR POSITION 2009: BUY THIS NEW YEAR'S WEEK DIP? .

Last week, the Dow declined 0.7 percent while the S&P 500 lost 1.7 percent and the Nasdaq shed 2.2 percent. Hardly a Santa Claus rally. But should you buy the dip?

“I’m pretty optimistic about 2009,” says JPMorgan Funds chief market strategist David Kelly. “I think we could see an expansion start mid-year but it might not feel like it.”

However, if you’re a long term investor Kelly is bullish. "We’re an economy of long expansions and short recessions. If you follow history eventually the economy will come back. People tend to forget that.”

What's the bottom line? Broadly speaking, "buy and hold from this point forward should be a winning strategy," according to David Kelly.





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Trader disclosure: On Dec. 29th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (DIS), (WMT), (SDS), (TM), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (DOW) Call Spread; Najarian Owns (MSFT) And Is Short (MSFT) Calls

GE Is The Parent Company Of CNBC

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (OFC), (DLR), (EXR), (IGE), (MAC), (DBC), (DBV), (SKT), (UA), (CLB); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights