Isn't it amazing how quickly the market can change? After about six straight weeks of losses, the Dow did a sharp about-face on Wednesday, catapulting higher after Wells Fargo (WFC) pleasantly surprised Wall Street with better-than-expected earnings (see also, "Wells Fargo (WFC) Turning the Tide").

Wells Fargo is the country's fifth-largest bank, and like many other U.S. financial institutions, it has suffered from heavy losses related to the subprime mortgage mess. But even though the company's profits fell from the same quarter last year, Wall Street was thrilled that its losses were smaller than forecasted. The company also raised its dividend by 10%, which was welcome news after last week's bank-collapse scare involving Fannie Mae, Freddie Mac and IndyMac.

Shares of WFC popped nearly 33% on Wednesday after the earnings surprise. The news also sparked a rally that was felt throughout the financial sector and the broader market. Many financial stocks that have been hurting for months got a sudden boost from all of the excitement.

So how can you take advantage of this rally? The key is to be selective. You need to be careful because some financials are still fraught with risk and danger. Let me tell you about a couple of dogs that you need to avoid–and two financial GameChangers that are ready to take off here in the second half of the year.

Sell These Two Financials

Financial firms have taken a brutal beating this year. As a whole, the sector used to make up 20% of the S&P 500, but because of the losses these companies have suffered, they now make up only 15% of the index. That shows you just how much their market caps have come down lately.

Recently we've seen many banks that were once respected fall flat on their faces. Citigroup (C) is a good case in point. Last month, Citigroup made a boneheaded decision to shut down one of its hedge funds after paying $800 million to buy it less than a year ago.

Lehman Brothers (LEH) also threw Wall Street for a loop when it announced last month that that it will post an unexpectedly large loss of almost $3 billion for the second quarter. Lehman blamed the anticipated loss on bad trades and hedges (see also, "Lehman Brothers (LEH) Share Price Smack Down").

At the same time, LEH announced that it would try to raise $6 billion through an offering of public and preferred stock. It also "reassigned" its CFO and COO to new positions within the company. This is another way of saying–nicely–that they had been cast aside as a result of their poor leadership.

This is quite a fall from grace for these financial firms. According to the annual Forbes Global 2000 rankings...