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Halftime Pt. 1: Is There Conviction Behind Market Gains?

Friday, 9 Jul 2010 | 1:46 PM ET

In midday trading, stocks inched higher for a fourth day Friday, putting the markets on-track for the best week of trading in more than a year. But from the floor of the New York Stock Exchange, Steve Grasso of Stuart Frankel remains skeptical of the rally.

Grasso tells Fast Money that his clients are reluctant to "get in front of this train" considering S&P 500 has gone from the 1000 to 1070 level in less than ten days.

But Grasso gave credit to Doug Kass of Seabreeze, who said on Tuesday's Fast Money that the market has made it's low for the year. In the three days that followed Kass' prediction, the number of S&P stocks above their 50-day moving average climbed to 28%.

"Doug Kass, so far, looks excellent this week," says Grasso, but added he's not sure that the bulls can push the market much higher.

But it's a good sign that after days of big moves, volatility is flat, says Pete Najarian of optionMONSTER.com. The Volatility S&P 500 is down considerably from levels last week.

The market is getting help from China-based plays, says Najarian. Some of the movement in the railroads, chemicals, energy and technology sectors are pointing to Asian markets because "maybe it's not that bad, not that slow in China."

It seems to me that negative momentum has reversed, says Joe Terranova of Virtus Investment Partners. So any negative trends in the market have now become positive. He notes that treasuries have weakened and there's risk-on in copper and oil yet again. Terranova recommends getting long laggards—those underperforming stocks.

Going into the first week of earnings season, Patty Edwards of Storehouse Partners thinks we will see more volume that will give investors greater conviction behind the move. But rather than concentrate on the earnings reports alone, she is looking for guidance going forward. Most companies have been slow to release that information, if at all, she says.

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MOVER OF THE DAY: GOOGLE UP AFTER CHINA WEB DEAL

After renewing its license to continue operating a Web site in China, Google's stock pushed higher Friday.

This is a valuation play, says Joe Terranova of Virtus Investment Partners, adding that the share price is as low as January 2008. If shares climb to $470, take some off the table, but hold into earnings.

Unlike Terranova, Patty Edwards of Storehouse Partners doesn't like Google as a valuation play, but on a momentum basis. She will watch to see where the Mountain View, Calif.-based company comes out in terms of earnings. She is also advising that investors sell a little, but hold into next week's earnings report.

Elsewhere in the tech space, shares of Research in Motion rallied Friday. This stock is "definitely a laggard," says Pete Najarian of optionMONSTER.com. He thinks the BlackBerry maker recognizes it has a tough competition in Apple's iPhone and Google's Android, so it's taking the fight to China. There is a lot of opportunity in the Asian markets, Najarian says, and says RIM remains the preferred brand for the US business community.

With the rally today, clients are "lightening up," says Steve Grasso of Stuart Frankel.

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ANALYZE THIS: EARNINGS SEASON

Second-quarter earnings season kicks off next week and Alcoa will lead the charge when it reports on Monday. Intel , Google, JPMorgan Chase , Citigroup , Bank of America and General Electric are also scheduled to report next week.

Analyze This
Why earnings won't change market fundamentals, with Jason Trennert, Strategas Research Partners.

Earnings will be good, but expect a considerable amount of risk aversion on the part of reporting companies, says Jason Trennert, a managing partner at Strategas Research Partners in New York. Companies are concerned about uncertainities regarding forthcoming regulation and taxes, Trennert says. He thinks it's likely they will wait for some clarity regarding these uncertainties before making any long-term decisions.

And with President George W. Bush's tax cuts soon expiring, he thinks its tough to say whether dividends will come back.

Watch the video to see Trennert's full comments.

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Trader disclosure: On July 9, 2010, 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 (CSX) Call Spread; Najarian Owns (ALTR) Call Spread; Najarian Owns (TCK); Najarian Owns (CNI); Najarian Owns (DD) Call Spread; Najarian Owns (AKAM) Call Spread; Najarian Owns (XLNX); Najarian Owns (CELG); Najarian Owns (TEVA); Najarian Owns (PFE; Terranova owns (GOOG),(AMZN),(MON),(APC),(GMCR),(MYL),(MRVL),(BAC) ,(ADI),(ADBE),(AKAM),(HES),(CVS),(AXP),(EMC),(ABT); Grasso owns (ASTM), (ABK), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST)

For Patty Edwards
Edwards Owns (SPY) For Clients
Edwards Owns (VXX) For Clients
Edwards Owns (QQQQ) For Clients
Edwards Owns (FCX) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (AAPL) For Clients
Edwards Owns (YHOO) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (V) For Clients
Edwards Owns (TXN) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (C) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (WFC) For Clients
Edwards Owns (MS) For Clients
Edwards Owns (GE) For Clients
Edwards Owns (CSX) For Clients
Edwards Owns S&P 500 For Clients
Edwards Owns Nasdaq 100 For Clients
Edwards Owns Gold For Clients
Edwards Owns Silver For Clients

For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Steve Grasso
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (IP)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (AAPL)

Late Additions:
Edwards Owns (PM)
Edwards Owns (PM) For Clients

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