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Halftime: Friday's Sell-Off Might Not Be What You Think!

We’ve gotten a resolution to the Goldman SEC case, clarity on finreg and the catastrophe in the Gulf appears to have turned a corner.

So why is the Dow down by triple digits?
Some investors suggest it's because the latest earnings from Bank of America, Citigroup and bellwether GE disappointed investors.

But the Fast Money desk thinks the sharp sell-off could be about something else, as well - technicals.

What must you know?

Instant Insights with the Fast Money traders

It seems to me that the market is range bound; it wants to trade between 1010 – 1100, says Pete Najarian. Both support and resistance have really been holding up. As we approached resistance I've noticed investors selling out of their positions.

I agree that lately as we approach 1105 or 1110 investors take profits at that point, says Jeff Tomasulo. Don't forget 1110 is the 200-day moving averge. Many investors are playing this market as buyers when the market hits the low end of this range and then as sellers when it hits the high end.

The market really does needs to break above the 200-day for bullish momentum to continue. However, it's important to remember the market rallied sharply over the last 6 days or so -one down day doesn’t necessarily mean we’re at an end of the rally, Tomasulo adds.

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BANK EARNINGS BUZZKILL

As we mentioned above bank earnings provided a fundamental reason for stocks to sell-off, Friday. After hearing results from Citi and Bank of America on Friday and JPMorgan Thursday, it seems there's more bad news than good -- it underscores growing concerns about the recovery.

How should you play financials?

The big take away from bank earnings for me was that the consumer is not healthy right now, says Patty Edwards. It's a trend I plan to watch going forward.

If you’re looking for trades, I’d look at Visa and Mastercard , says Pete Najarian. I’m a buyer of Visa around $70 and Mastercard around $200.

I’m watching the TLT, says Brian Kelly. I think we get to a yield of 2.80% on the 10-year. That's my bogey.

If you’re looking for a trade in the space, I’d look at Charles Schwab adds Edwards.

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GOLDMAN TRADES HIGHER

While the rest of the financial sector is in the red, Goldman Sachs traded sharply higher Friday following its settlement with the SEC.

As you might remember on Thursday’s Fast Money Sanford analyst Brad Hintz told us, in the wake of the settlement Goldman was a $200 stock.

”This is a good company that can generate ROE’s of 17% or 18% (even) under Volcker,” he said.

What should you make of it?

I can’t get on board wit the estimates from Hintz, says Brian Kelly. With finreg I just don’t see how they’re going to generate the same trading profits in the future that they’ve generated in the past.

But options action suggests to me investors are feeling more confident about Goldman Sachs, counters Pete Najarian.

> Click here to find out what Joe Terranova and Tim Seymour think lies ahead for Goldman shares
Want to learn more about the Goldman trade going forward?

Watch the video to your left and hear from Larry McDonald of Pangea and author of "A Colossal Failure Of Common Sense, The Inside Story Of The Collapse Of Lehman."








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MARKET BUZZKILL: GOOGLE

Google was the big market buzz kill Friday after profits missed Wall Street estimates.

The Fast Money traders find it noteworthy that since the company announced it would pull out of China, shares have lost over $100 with market cap sliding by $25 billion.

What’s the trade?

I just think Google is too big, muses Patty Edwards. Companies this size have a tough time moving the needle.

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APPLE IPHONE 4 PRESS CONFERENCE

Investors are hoping Apple shares stabilize after the company’s surprise Friday press conference.

What should you make of it?

This isn’t going to cause us to change our rating on Apple, says Colin Gillis of BGC. Apple is much more than the iPhone. This is just a distraction.

I’m a buyer of Apple right here at these levels, says Pete Najarian. I’d probably do it through options – look at a call spread.

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12 DOW MEMBERS /122 S&P 500 MEMBERS REPORT NEXT WEEK

You probably know that Goldman Sachs and Apple are set to report next week, but did you know 122 companies in the S&P 500 and 12 firms in the Dow also report next week.

What are the Fast Money traders watching?

Patty Edwards: Pepsi -- It’s a staple; people love their fizzy drinks and chip, she says. And I expect earnings will be strong.

Brian Kelly: Peabody -- I’m keeping a close eye on these results because they could have a lot to say about the world economy, he explains.

Jeff Tomasulo: Netflix -- I like owning leaders and this company has really outperformed, he says. However, it’s up 119% for the year so it could have a major pullback if there’s something in earnings investors don’t like.


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UNDER THE RADAR: SMALL CAP SUMMER PLAY?

Good housing plays are few and far between these days but Trex , a maker of composite deck and railing products, may be poised to cash in on homeowners staying put and fixing up their homes.

What must you know about this company before you place your bet? Find out from CEO Ronald Kaplan. Watch the video above. (You'll find our conversation with Kaplan right after the report on Apple!)

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CALL THE CLOSE

Patty Edwards: Don’t play this market without hedging.

Brian Kelly: I’m a seller of the market.

Jeff Tomasulo: I’d go short into the close.

Pete Najarian: Make sure to stay hedged.


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Trader disclosure: On July 16, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Kelly Owns (BP) Puts; Kelly Is Short (GS); Tomasulo Is Short U.S. Dollar vs. Euro; Tomasulo Owns (CAT), (MCD), (VZ), (NFLX), (VXX); Tomasulo Owns (RIG) Calls; Tomasulo Is Long Spot Gold Futures; Najarian Owns (C) Calls; Najarian Owns (V) Call Spread; Najarian Owns (LOW) Calls; Najarian Owns (XLNX); Najarian Owns (ALTR) Call Spread; Najarian Owns (CNI); Najarian Owns (AAPL) Call Spread; Najarian Owns (NOVL)

For Patty Edwards
Edwards Owns (GLD) For Clients
Edwards Owns (MS) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (C) For Clients
Edwards Owns (WFC) For Clients
Edwards Owns (GE) For Clients
Edwards Owns (BA) For Clients
Edwards Owns (V) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (YHOO) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (DELL) For Clients
Edwards Owns (HPQ) For Clients
Edwards Owns (INTC) For Clients
Edwards Owns (PEP) For Clients
Edwards Owns (HD) For Clients
Edwards Owns S&P 500 For Clients
Edwards Owns Nasaq 100 For Clients
Edwards Owns Russell 2000 For Clients
Edwards Owns Gold For Clients
Edwards Owns Silver For Clients

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (ELX)
Accounts Managed By Kanundrum Capital Own (QLGC)
Accounts Managed By Kanundrum Capital Own (BIG)
Accounts Managed By Kanundrum Capital Are Long Yen
Accounts Managed By Kanundrum Capital Are Short (BA)
Accounts Managed By Kanundrum Capital Are Short (KMX)
Accounts Managed By Kanundrum Capital Are Short (CSX)
Accounts Managed By Kanundrum Capital Are Short (IWM)
Accounts Managed By Kanundrum Capital Are Short (USO)
Accounts Managed By Kanundrum Capital Are Short (FCX)
Accounts Managed By Kanundrum Capital Are Short (XLF)
Accounts Managed By Kanundrum Capital Are Short (XLE)
Accounts Managed By Kanundrum Capital Are Short (XLI)
Accounts Managed By Kanundrum Capital Are Short (ATI)
Accounts Mgd By Kanudrum Capital Own (GLD)
Accounts Mgd By Kanundrum capital Are short Pound

For Brad Hintz
Accounts Over Which Bernstein And/Or Affiliates Exercise Investment Discretion Own 1% Or More Of (GS)
(GS) Is Or In Past 12 Months Was A Client Of Bernstein (Non-Investment Banking Securities Related Services), Bernstein Received Compensation From (GS)
An Affiliate Of Bernstein Received Non-Investment Banking Compensation From (GS) (Securities-Related Services)
Bernstein Or Affiliate Expects To Receive/Seek Investment Banking Compensation From (GS) In Next 3 Months

Larry McDonald
***NO DISCLOSUERS

Colin Gillis
***NO DISCLOSURES

GE Is The Parent Company Of CNBC

CNBC.com with wires

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DJIA
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BAC
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BTU
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C
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GE
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GS
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JPM MLP ETN
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MA
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NFLX
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PEP
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SCHW
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ISH BAR 20YTB
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TREX
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V
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SPDR FIN SEL
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AAPL
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MCD
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GOOGL
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