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Halftime Report: Can You Still Profit In This Tape?

Both the Dow and S&P were trading in negative territory on Monday with the latest durable goods report triggering new reasons to worry about the economy.

A Commerce Department report showed that orders for big-ticket manufactured goods dropped an unexpectedly steep 2.5% in June. Economists were only expecting a decrease of 0.6%.

The data sent oil prices plunging, as investors feared that less manufacturing meant less demand for oil. Unease about business conditions has put a two-week rally on hold since Friday.

Can you still profit in this tape?

Instant Insights with the Fast Money traders

The market can’t go straight up, explains Steve Grasso of Stuart Frankel. And right now there are still no fundamentals behind the market. I think that’s what investors are looking at.

Options investors have pushed both the VIX and the VXN higher, explains OptionMonster Jon Najarian. But that's a positive, it means they're holding protection. And that seems prudent considering the market is at a critical level in the Dow and just shy of serious resistance level in the S&P.

It seems to me that the S&P is overbought, adds Scott Nations of NationShares. That doesn’t mean the market will collapse, it may very well just bump along. But it does mean the bulls will face a pretty strong headwind as they try to drive the market higher.

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MICROSOFT, YAHOO GET IT DONE

At long last Microsoft and Yahoo! struck a partnership deal to better compete against Google , but the agreement stopped short of combining their display advertising businesses and Yahoo shares fell on the news with investors disappointed by the limited scope of the deal.

Those that were looking forward to a take-out, the deal today was rather disappointing, explains Marc Pado, of Cantor Fitzgerald. The 10-year pact, it's not a bad thing. It's not as good as what investors expected.

What’s the trade?

It seems to me that investors were looking for something that wasn’t there, muses Jon Najarian. Personally, I don’t think it’s a bad deal for Yahoo! They’re getting paid handsomely. If the stock trades lower I think it’s a buying opportunity.

Option investors were clearly hoping Yahoo! stock would pop on the deal -- and that did not happen, adds Scott Nations. Now those investors who bought calls are puking!

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OIL PLUNGING

The price of oil took a big hit on Wednesday after an unexpected rise in U.S. crude inventories threw the focus on weak demand.

Is the sell-off justified or overdone?

It’s entirely justified, explains Addison Armstrong of Tradition Energy. It shows that the fundamentals have reasserted themselves. I expect to see oil test $58.30 and if that doesn’t hold it could go down to $55.

But if and when oil touches those levels mentioned above, I’m a buyer, counsels Jon Najarian.

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TRADE TO GO – CHEMICALS

I’m focused on Dow Chemical, explains Fast Money trader Pete Najarian. On any pullback in this stock, I’m a buyer due to their acquisition of Rohm & Haas.

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CALL THE CLOSE:

Steve Grasso of Stuart Frankel: I’m a seller.
Scott Nations of NationsShares: I’m a seller.
Jon Najarian of Optionmonster.com: I’m a seller.
Pete Najarian also of Optionmoster.com: I’m a seller. I’m watching to see how the market does as it tests technical resistance levels.


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Trader disclosure: On July 29th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (FXP) Long Calls; Najarian Owns (MET) Long Calls; Najarian Owns (BAC); Najarian Owns (INTC) Call Spread; Najarian Owns (JPM) & Short (JPM) Calls; Najarian Owns (MS) & Short (MS) Calls; Najarian Owns (MSFT) & Short (MSFT) Calls; Najarian Owns (PALM) Call Spread; Najarian Owns (V) & Short (V) Calls; Najarian Owns (YHOO) Call Spread; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU);Terranova Owns (MSFT), (MCD), (AMZN); Terranova Works For (VRTS) ; Seymour Owns (BAC), (BHI), (FCX), (SBUX), (EEM); Seymour's Firm Is Short (PBR), (PTR)

Gartman Owns (SDS)

RBC Capital Markets Managed a Public Offering Of (DIS)
RBC Capital Markets Has Received Compensation from (DIS)
RBC Capital Markets Is A Market Maker In Shares of (DIS)
RBC Capital Markets Is Currently Providing (DIS) With Non-Securities Services

For Mark Mahaney:
Citigroup Owns (MSFT)
Citigroup Has Received Compensation From (MSFT)
Citigroup Has Received Compensation From (YHOO)
Citigroup Has Received Compensation From (GOOG)
Citigroup Has Had (MSFT) As A Client In The Past 12 Months
Citigroup is A Market Maker In Shares of (MSFT)
Citigroup is A Market Maker In Shares of (YHOO)
Citigroup is A Market Maker In Shares of (GOOG)

CNBC.com with wires

Symbol
Price
 
Change
%Change
DJIA
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S&P 500
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DOW
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MSFT
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VIX
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YHOO
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GOOGL
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