are you on board this bull yet? stocks closing their biggest weekly gains since the rally began in march. i'm melissa lee and this is "fast money." these are your expert "fast money" traders. here to tell you the best way to ride this run. huge earnings reports next week including microsoft and apple. certainly got a lot to talk about. let's get to the word on the street right now. guys, 7% gains across the board but we are only just a small fraction of the way through h earnings season. are we already pricing in a very good season here? >> well there you go again debbie downer. right off the bat. >> right at the top of the show. >> no, my job is to insert skepticism into the discussion. go ahead. go ahead. present the whole case. >> here we go. first week of earnings, first week of earnings. everyone told you to do the following. they told you to sell goldman sachs after the number came out.

they told you to sell j.p. morgan morgan. they told you to sell intel. how did those three trades work for you? they worked horrible for you and they worked horrible to you and for a reason. the reason was in the first quarter china was the economic stabilizing force. now the next leg what is the economic stabilizing force? it is the strength of those corporate balance sheets. selling those three names didn't work. we march on. >> i got to correct him a little bit, however. i think it actually came down you loved all those names going into the earnings. you had everything you wanted going into the earnings. take some profits. don't go short any of these names. i don't think anyone ever said that. they said take profits. yes, goldman sachs did go up another % or 3%. yes, intel did improve, and, yes, you started to see more and more of that take place. but the run going into the earnings was so extreme you have to take what the market gives you. the market gave you great runs all week. you got to take some profits. wait for the next opportunity. this market, we could be at 900 in the next four days or we could be at 960. the market's giving you a trading opportunity. >> here's the problem. i got to respond. here's the problem with taking profits in this environment.

it is the new normal and there is a tremendous amount of capital sitting on the sidelines. asset allocation. doing exactly what you're suggesting. wait for the pullback. wait for the pullback. >> this is not your last chance. this is not your last chance. there is a thinking out there that this is not a new bull market because for a bull market to happen historically, you need a hang in leadership. who have been our leaders up to now? technology as well as financials the same old leadership group. >> energy, though. >> yeah. >> listen, right now, you know, joe's talked about this before, and i agree 100%. we need energy. once energy takes off from here and i believe it could especially oil going into hurricane season, energy comprised a large part of the s&p. 80% of the companies that reported this week meet or beat expectations. balance sheets are strong. the next catalyst could be energy. and i think -- >> and we've been flat-lined for so long when you look at technology and when you look at the financials they've been basically steady and what we've had moving the markets around has been energy.

the move up, the move down. now this next leg we're starting see the financials and technology push us from 900 to 940. now if we do get that energy, if we do get that china that you're talking about, agriculture, oil, copper, all those names move us back up to the upside of the curve. >> is this a good sign, karen, that we've seen some pretty good stability in the markets particularly in the financials even though we had the run, up about 9% for the week. we didn't have a selloff off the back of these very strong earnings. >> right. they moved up so far so fast and still were able to hang on. j.p. morgan even adding on to the earnings for the week. today the bank of america a earnings were pretty interesting i thought. a lot of noise there. they had some interesting pockets. anything in california and florida is very problematic for them. but they had some tiny signs of credit improvement that probably bodes well for american express. they actually had a lowering of some of their nonperforming assets in some areas of the consumer area. that was good. the provisions were obviously

huge as we expected hem to be. >> they doubled year over year. >> but you can start to see where the earnings power is going to come from. the interesting part of bank of america is they really didn't have the strength that a goldman sack is did on banking the trading, that was not there for them. they had one-time gains from assets they sold as part of their stress free recapitalization which they did a good job. i think bank of america is interesting but the one last thing i want to point out is they had some nice reserves ads but it shows their reserves are 3.61. when you look at j.p. morgan morgan at 5, really a testament to how big their cushion is and if that ever comes down for j.p. morgan the earnings power for them is enormous. >> from the options side i've seen a lot -- first of all, huge crush in volatility.y. august volatility has come down huge and nobody is buying protection. i can't believe it. i'm seeing all the puts come in. everything across the board, you're looking at ibm today, nobody is worried about this thing falling out of bed. and there's two sides to that.

one side is protection is cheap. you can buy puts cheap. the other side is when it gets that cheap that to me is like on a contrary perspective a little bit of caution. >> and the tale of the tape this week was the panic to the upside. when everybody felt they missed it. you were talking about the money sitting on the sidelines, joe. you're exactly right. that money has not been performing for people, they panicked.. they had to get in. those that were short really panicked. that pushed the volatility index up towards 6. now we're back toward 24. i think next week you will start to see some people start to come after that volatility. they're going to start positioning with the new monthly rollout. they're going to want to have that foot protection because you know what, like i said earlier, i think 900 as much as i'm a bull right now we could be at 900 in a blink of an eye. >> go back for one second. bank of america versus citigroup. there is a clear divergence here. when you look at citigroup they gave up basically smith barney. when you look at bank of america, they acquired merrill lynch. i think going forward that'll be the difference between owning citigroup and owning bank of america. right now i don't think when you

look at citigroup you should have any inclination to own them. bank of america, yes, you can, because eventually they'll solve their problems, and they will reap the revenue. >> and the trade coming out of it in my mind, the cream of the crop, obviously it's goldman sachs. the next one morgan stanley. they will crush. they've been conservative but also stole smith barney from citigroup. and that's going to add to their earnings, not right now but i think if you're looking, that's in the pipeline right now for morgan stanley. morgan stanley is ready to kill them. >> let's go deeper into citi. joe said there is no reason to own them. if you look at their books, karen, a lot of people on the street are scratching their heads still, even 12 hours or so after the earnings release not really knowing how the results actually came out. what we do know is investment banking was down 7%. retail banking was down 19%. these core businesses are down. >> well, they are down if you think about the quarter that goldman sachs had. where did they take market share from? they take it from weakened competitors. that would be somebody just like a citi bank.k. it's so noisy it's hard to know what's going on. you had some asset sales that were gains there.

and you don't know what it looks like going forward. citigroup is in the process of being dismantled. so it's hard to really get comfortable. if you want to play the financials coming back i agree very much with joe i'd be in bank of america or jp morgan because you don't know what the citigroup play is. >> and that really raises questions about the fate. we talked to charlie about that yesterday. it seems like perhaps the clock is ticking for -- >> there is a rising star at citigroup. ned kelly, cfo, he is a rising star there. so there's hope on the way. >> let's go on to another one in the financial world, the regional banks, local banks still have steeper exposure to a weak consumer than some of the big wall street firms especially when it comes to their loan portfolios. bb&t coming out today. we got some sort of idea of what we could expect. joe, this is an area you've been tracking for a long time. you don't favor this. >> we have been talking about being along capital markets and selling regional banks. though understand one thing. regional banks are heavily, heavily shorted sector right now so the play is to stick to the etf which is the kre which is

the regional bank. that gives you the short exposure. the reason you want the short exposure, jamie diamond, karen's boyfriend said it clearly. you still have banks and the regional banks are the ones that have the commercial loan and prime jumbo mortgage exposure. and that hits, melissa, that hits 6 to 12 months after the initial stages of the crisis because they can hang on in the beginning but now you're going to see the effect of that. that's why the regional banks. the city nationals, comericas. those are names you don't want to own. >> we have some reporting next week, u.s. bancorp, suntrust. karen, do you like joe's idea to go long to capital markets, go short the regional banks? >> i do, i do, because that commercial -- both commercial loans and commercial real estate, both of which the regionals like a bb&t have, you look at it today. the shopping mall reit, bad numbers, the stock was down 15%. what does that tell you?u?

who lends to them? i don't know -- >> these are cumbersome transactions. a commercial transaction is not as easy to modify as a quick retail-type transaction. keep it in mind. this is going to be a big shift and is probably going to move lower and will be a lot more difficult to turn around in my opinion. >> within that space, fifth thirds and regions, i don't want to lump them in because their balance sheet has less of that exposure. >> quickly, karen, you recently took off your short on commercial real estate. >> yeah, go ahead. >> if you're a believer -- excuse me, regional banks are in danger because of their exposure to commercial real estate, when do you look to put back on that short? >> well, you know, the rmc which is an index you can track is really volatile. for any of the ones that were able to raise equity those are the shorts i took off specifically forrest city but i'd like to see the rmg back up to around maybe 440, 450, you know. today it was down i think 11. so i'm a -- we're a little away. >> next right here shares of cit group doubling today on a report from reuters that the struggling lender is in talks with jp morgan and goldman sachs for short-term financing.

microsoft, apple, ebay all get ready to report. >> you have to take this read and everything they've done so far has shop us, talked about stabilization then they talked about surprising chip growth back in may and then they put up these numbers. they had the great margins. i look forward to novidia but because of the fact the graphics chipmaker is involved in everything and tarting to push lew that $12 level it's been an area that's had a difficult time getting through. plenty of option activity.. a name you what pts to keep a look at as you're looking at it. >> karen, do you think it'll be a catalyst for the stocks. >> it'll be a catalyst for pain. there are a couple things when i think about what could microsoft report? you look at dell. you have bad news out of dell. it was more dell specific i think.k. ibm, very good news. intel, very good. so i actually am mildly positive on microsoft. that will haunt me.

>> well, microsoft. >> i like that. >> you have two big triggers in front of you. you have window 7. you have bing. >> isn't that -- >> the bing? >> and -- >> the yahoo conversation is not over with. that could resurface today again. i'll tell you what, that could be a very, very miniscule amount of money in billions compared to the $47 billion they were looking at before. this could be a great investment by microsoft right now to get their search thing really kicked into gear. >> i know what you have -- what you have to love about microsoft is for the first time in several years their strategy is to be aggressive again. they're getting back the innovation that they had in the mid '90s. they're reacquiring it. they're going after apple. they're opening retail stores. they're going after google. they're going after their competitors and you know what? they have $26 billion sitting in cash to do it. >> and to joe's point -- >> just quickly. >> apple is a little upset that microsoft is coming after them. their attorneys contacted them. they don't like their commercials where microsoft computers or pcs are portrayed as cheaper than apple.

so -- >> well, they are. they are cheaper. >> i know. it's crazy. it's a low volatility stock that usually won't hurt you too bad. >> coming up later in the show, one stock has climbed to a high not seen before the market collapsed last fall. we'll reveal it who it is in "fast flash." next here, markets pushed up almost 7%. many investors thinking the worst is surely behind us. some are not too sure. one of them is patty edwards, the founder of of storehouse partners. she thinks the party may have started too early and she joins us from seattle. okay, patty. you're the bear here. why are we too early? well, there's so many other things going on that we are not talking about. let's talk about the consumer first. you know, the consumer is totally leveraged. they are on life support at this point. we are seeing a little bit more buying but not much. we have a consumer economy, 70% of the u.s. economy is consumer driven. you start looking at where they can get credit. they can't. their homes aren't worth what

they were worth before. they can't sell their homes if they wanted to. they don't have jobs. and then you start looking at the earnings and i think this is the most important part. how many of the companies that have reported so far and/or will report in the next week have actually had top line revenue growth as opposed to earnings growth? you know, we are not going to cost-cut our way out of this. we need to actually rectify the fact that valuations cannot return to where they were before given the fact that the consumer cannot come back to the level they were at before. >> housing is also troubling to you, so, patty, given these three factors and three reasons why you are a bear how do you u play this market?? >> you know, i am being very, very conservative at this point. philip morris international gives me some international exposure. we talked about this before. gives me international exposure. i really like the fact that, you know, it's a vice stock. you're not going to give up much in the way of vices in this economy and i think the emerging markets are going to come back sooner. all international play has absolutely nothing to do with the u.s. beyond that i think people are going to continue to trade down.

i think that this is a situation where we are going to see the consumer really retrench to the anyway point where my grandparents did during the depression and i think people will trade down to a walmart. >> patty, is there anything you could see next week that could change your mind at all as far as the earnings front? is there any type of numbers that could come out where you'd suddenly say, you know what? maybe the consumer is not as bad as i first thought? >> you know, there's not that much the consumer next week. maybe if somebody like starbucks which is a little bit higher end comes out and tells me things are fabulous, you know, maybe i'd be excited then but the retail numbers aren't going to be out for two or three weeks. what we are seeing so far is a real big pullback at this point. >> patty, we'll leave it there. thanks for joining us. patty edwards with storehouse partners. >> you gotta love that. a woman after my own heart. >> all right. we do want to clarify something that patty said today on the "halftime report." dillard's does not have exposure to cit. we're going with the flow and breaking news so we just want to

clarify that. and as i understand we do have breaking news and want to go back to headquarters with an update from our managing editor. tyler mathisen. melissa, just in, nuriem roubini is still bearish. back you to. >> tyler, thank you very much. still bearish. we should know. coming up next we're going to vegas. what is in the cards for the gaming industry and the traders make their bets on the volatile casino stocks in just a minute. ♪ on this endless ocean ♪ finally lovers know no shame ♪ ♪ watching in slow motion ♪ as you turn to me and say

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welcome back to "fast money" and it's time for the dice roll. one of the biggest gainers in the market this year. las vegas fans up 50%. mgm is down 50%. for insight as to what is going on in this topsy-turvy industry. jeffrey joins us, the commissioners of the world

series welcome back. the economy must be having an impact. we see that as evidenced. what are you seeing in terms of attendance and participation? >> here's what i can tell you. it may be a bit of a surprise but the world series of poker which concluded on wednesday had its biggest year ever. total prize money awarded over the last 0 years. looking for something that's recessionproof it's poker and the world series. >> why do you think that is? >> i think that poker is truly a global game. it's america's game. demand for the wsop has never been higher. poker players measure themselves against each other by how many wsop gold bracelets they have and the only place you can get them is at the world series of poker. and i think that what we

experienced over the last 50 days and the 57 events we had, 10 of which were sellouts, is a testament to the great demand for our product and for poker globally. >> jeffrey, i am completely addicted. i watch this thing constantly on espn and wherever else it's on for the world series of poker. i love it and i think it's unbelievable. let me ask you something. how does that feed into the casino industry itself? is there any metric that you have at all that tells you because of the fact that you're doing so well, that should, in fact, put something in to win to mgm and the rest of the las vegas base? >> what i can tell you i haven't seen the hard data from the last two months but there certainly was a buzz not only inside the halls of the rio and caesar's palace and all of the other harrah's properties but there was absolutely a buzz in las vegas over the last two months during the wsop and i think it's fair to say we lifted the city over the last 60 days or so, and again, it's a reflection of the incredible appetite for poker and for the world series of poker. >> jeffrey, always good to talk to you.

jeffrey pollock. >> thank you. >> i think it's great pete loves the world series of poker and also good that probably a quarter of the hedge fund community was at the world series of poker event and probably missed the rally and now is going to come back to allocate. they were all out there. but if you look right now, you look at the vegas casinos specifical specifically, mgm and las vegas, you're talking about casinos that have heavy, heavy debt levels. if you are going to invest in gaming you want to look at the regional operators, those las vegas casinos. they are too tethered to the staycation mentality. look at the regionals, penn mats, look at igt which provides the equipment. stay away from the balance sheets. mgm's balance sheet is a heavy debt load. >> i think igt is the them too. with the staycation theme, a lot of cities gaining the ability to gambling, philadelphia being one and igp would benefit from that versus the bigger casinos. >> especially as states are scrambling to fill their budget gaps. time to go to our weekly edition of "pops and drops." these are moves on the week.

goldman sachs is up 10%. joe? >> goldman sachs up and made 6.8 in the component revenues. but look at what goldman sachs can do. they can do what others can't. they can take risk again. that was evident in citigroup's earnings today. taking risk is important for earnings going forward. >> j&j was up 4% on the week. pete? >> their revenues were phenomenal. it's the diversification they've got. even though they lost a billion dollars in sales of their top two drugs, they still managed to put up a great number. j&j is the diversification that makes them such a premiere player. >> pop is up, jared? >> you know, great stock, doing fantastic. i love this sector. i like copper. i like gold. it plays into the whole inflation thing. also plays into the energy, as well. the stock up here i'd be really careful though. i'd probably take slow profits but i like it long term. >> nokia was down 6% on the week, karen. >> yeah, nokia had an earnings release that wasn't great yesterday. the quarter itself wasn't so bad. it was the guidance going forward. it was a margin compression. it was disappointing.

>> okay. here's a drop for nasa. almost exactly 40 years ago on july 20th, 1969, one man first walked on the moon. despite the gravity of the momentous event nasa has managed to erase the original tapes of the moon landing and reused them in an effort to conserve money. "fast money" has come across the missing tapes. and here is what we've discovered. >> yes, indeed. they've got the flag up now. you can see the stars and stripes -- welcome to the crossroads of the world, new york city's times square. >> i'm glad somebody has it. >> programming over that thing. >> exactly. coming up next today's trading at a level not seen before the credit crisis and its earnings are looming next week. we'll tell you who it is. plus our traders' best and worst calls for the week. stay tuned. undefeated professional boxer floyd "money" mayweather

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welcome back. harvard collected a cool $31.7 million this week alone. that's it for us. coming up next, "options action." next, the earnings countdown is on. our options traders picking apple? we'll check the smart money moves and put the odds in your favor. "options action" next on cnbc sponsored by sink or swim. businesses more efficiently, so we've brought in a team of experts to help.