Does Rally Signal Larger Bullish Advance?

Maybe it was valuation. Maybe it was technicals. For whatever reason, the Dow Jones Industrial Average and S&P 500 surged Wednesday.

Forget the naysayers, says Tim Seymour of EmergingMoney.com, because the economy is "not that bad." He thinks today's rally proves we haven't seen bad economic data yet.

Some of the negativity was "overdone," says Guy Adami of Drakon Capital. Watch the 1040 level in the S&P 500, he says. Adami thinks the markets could ultimately go lower, but with the 1040 level, you know what you're trading against.

"You had more signs of confidence today," says Joe Terranova of Virtus Investment Partners, citing positives in Europe, the bond markets and technicals as examples. That confidence is what was missing yesterday. He agrees with Adami that the 1040 level gives investors an idea of what kind of risk is involved.

Karen Finerman of Metropolitan Capital Advisors thinks valuations have gotten to extremes. With valuations overdone to the downside, Finerman called Wednesday's rally "inevitable" and doesn't make much of it.

Brian Kelly of Kanundrum Capital agrees with Finerman, saying "we shouldn't make too much of one day." His bogey is the 1100 level in the S&P 500. If it gets to that point and the markets are still performing well, he would acknowledge that something has changed fundamentally. But until then, he doesn't recommend getting long in this market.

Both Kelly and Finerman agree it's earnings that really matters. At that, Seymour chimed in. Don't pay attention to headlines or trader's expectations for levels in the S&P, he says. Instead, look at how individual companies are doing.

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TOPPING THE TAPE: FINANCIALS

Financials led the charge Wednesday with the Bank ETF rallying sharply. European banks in particular saw large gains on optimism that the stress test will prove to be well capitalized.

Investors believe the results of the stress test will be better than expected, says Kelly, and that helped financial names push higher. The results will be released by July 23.

Seymour also feels good about the stress tests, saying it will generate greater transparency and as a result, greater confidence.

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BEHIND THE RALLY WITH JON NAJARIAN

The Monster, Jon Najarian of optionMONSTER.com, has found stats that suggest Wednesday's rally may not be as robust as you’d otherwise think.

Get all the details. Watch the details now!

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BULL MARKET OR BS?

Not every investor found Wednesday's triple-digit rally encouraging and we spoke with one of them.

Gary Shilling, president of A. Gary Shilling & Co., tells us he's still very concerned about Europe. He says the stress test of European banks could trigger contagion. The banks are so entertwined, they will be pulled into any debt crisis.

Shilling thinks Greece will have to restructure because of its public debt problem. In Spain, he says there is a private debt problem.

In the US, he thinks Wednesday's rally could be a one-hit wonder. His target on the markets could break the old lows of 666 on the S&P 500.

Watch the complete conversation with Shilling by watching the video.

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Trader disclosure: On July 7, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; inerman and Finerman’s Firm owns (AAPL); Finerman’s Firm owns (AEO); Finermans’ Firm owns (ANF); Finerman’s Firm owns (BAC) stock and calls; Finerman and Finerman’s Firm own (BAC) preferred; Finerman and Finerman’s Firm owns (BBY); Finerman owns (BP) calls; Finerman and Finerman’s Firm owns (C); Finerman and Finerman’s Firm own (CVS); Finerman owns (GLW); Finerman & Finerman’s Firm owns (GOOG); Finerman & Finerman’s Firm owns (HPQ); Finerman & Finerman’s Firm owns (IBM); Finerman & Finerman’s Firm owns (JPM) stock & calls ; Finerman’s firm owns (PM); Finerman’s Firm owns (RIG); Finerman’s Firm owns (TGT); Finerman’s Firm owns (WMT); Finerman’s Firm is short (IJR); Finerman’s Firm is short (IWM); Finerman’s Firm is short (MOY); Finerman’s Firm is short (SPY); Kelly Owns (BP) Puts; Kelly Is Short (GS);Terranova Owns (BAC), (MRVL), (MYL), (MON), (APC), (GMCR), (AXP), (TER), (XCO), (GOOG), (AMZN), (GS), (CVS), (ABT), (HES), (ADI), (ADBE), (AKAM), (EMC); Seymour owns (AAPL), (BAC), (GOOG), (INTC), (POT), (WBD); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck

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 Brian Kelly:
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital own Gold
Accounts managed by Kanundrum Capital own Treasuries
Accounts managed by Kanundrum Capital own US Dollars
Accounts managed by Kanundrum Capital ARE short (AMZN)
Accounts Managed By Kanundrum Capital Are Short (BCS)
Accounts managed by Kanundrum Capital ARE short (RCL)
Accounts managed by Kanundrum Capital ARE short (XLY)
Accounts managed by Kanundrum Capital ARE short (XLE)
Accounts managed by Kanundrum Capital ARE short (AFL)
Accounts managed by Kanundrum Capital ARE short (CME)
Accounts managed by Kanundrum Capital ARE short (EWI)
Accounts managed by Kanundrum Capital ARE short (EWO)
Accounts managed by Kanundrum Capital ARE short (GS)
Accounts managed by Kanundrum Capital ARE short (HIG)
Accounts managed by Kanundrum Capital ARE short (RKH)
Accounts managed by Kanundrum Capital ARE short (XLF)
Accounts managed by Kanundrum Capital ARE short (XLI)
Accounts managed by Kanundrum Capital ARE short (FCX)
Accounts managed by Kanundrum Capital ARE short (GFI)
Accounts managed by Kanundrum Capital ARE short (JOYG)
Accounts managed by Kanundrum Capital ARE short (XLB)
Accounts managed by Kanundrum Capital ARE short (XLK)
Accounts managed by Kanundrum Capital ARE short (V)
Accounts managed by Kanundrum Capital ARE short (PCAR)
Accounts managed by Kanundrum Capital ARE short (COF)
Accounts managed by Kanundrum Capital ARE short (KMX)

Doug Kass
**No Disclosures**

Gary Shilling
**No Disclosures**

Rob Samuels
**No Disclosures**

Heather Bellini
**No Disclosures**

Mike Khouw
Cantor Fitzgerald makes a market in (CSX)

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