Four Amazing Trades...

This past week was a good one to be bearish...

OUR QID FEB 19 CALLS FINALLY CAUGHT FIRE JUMPING AN OUTSTANDING EIGHTY-FOUR PERCENT!

OUR BRAND NEW SKF MARCH 22 CALLS CATAPULTED TO A FIVE DAY SEVENTY-SEVEN PERCENT OPEN PROFIT!

OUR NEW CENX FEB 15 PUTS JUMPED TO AN INCREDIBLE FIVE-DAY ONE-HUNDRED-SIXTY-FIVE PERCENT OPEN PROFIT!

AND OUR LLTC FEB 30 PUTS ARE UP AN AMAZING TWO-HUNDRED-FIFTY-SIX PERCENT--AND RISING!

And those are our ONLY open positions--we don't have a single loser and the winners are all still open--so the profits are very likely to go higher from here!

After Friday's close toward the lowest point since early December one has to wonder what's in store for the coming week--to find out let's take a good look at...

WHICH WAY THIS MARKET IS HEADED

There was some serious selling going on this past week so the two most important questions we can ask are--why--and will it continue?

If you look at the timing of the sell-off it wasn't related to the economy or even earnings--earnings have been pretty spectacular compared to the fourth quarter of 2008.

This sell-off was purely news driven.

After Republican Scott Brown's surprising victory in overwhelmingly Democrat dominated Massachusetts, President Obama spoke at a town hall meeting trying to focus people's attention on the banks--proposing tougher limits on big banks' speculative activity and an intention to 'get the people's money back' from the TARP dispersements--but noticeably left out the biggest recipients of TARP money Fanny Mae, Freddie Mac, AIG and of course the big employee voting blocs represented by GM and Chrysler.

His proposal fueled an immediate 213-point slide in the Dow when it was unveiled on Thursday and continued to drive the sell-off into Friday's session.

In president Obama's opening paragraph in the new bank rules speech he said: "Good morning, everybody, I just had a very productive meeting with two members of my Economic Recovery Advisory Board: Paul Volcker, who is the former chair of the Federal Reserve Board, and Bill Donaldson, previously the head of the SEC, and I deeply appreciate the counsel of these two leaders..."

Treasury Secretary Geithner was on the podium with the group but was not even mentioned and spent most of the speech looking at his shoes.

Volcker is just an advisor and Geithner is Treasury Secretary so it appears 'Turbo Tax Tim' may be next up on the sacrifice list as the administration tries to project a new 'get tough' on Wall Street image. Geithner is perceived as a 'Wall Street insider'.

Investors also hit the sell button on news Friday that some congressional Democrats are growing skittish about confirming Bernanke to a second term as Fed chairman. Senators Boxer and Finegold--both up for reelection this year and suddenly vulnerable--spearheaded the effort to attack Bernanke.

Several analysts estimate there could easily be a 10% sell off if Bernanke is not confirmed. There is only a week left in his term and if he isn't confirmed for a second term Donald Kohn, a Fed banker since the 1970s, would temporarily fill his seat until a successor could be named.

Analysts claim this sudden rousting of Bernanke is meant to show that our lawmakers are 'taking action' on the banking crisis by throwing out the old guard.

The Bernanke problem is going to escalate over the next few days--there is a Fed meeting on Tue/Wed and his confirmation problems will be on every news channel and every newspaper. This will be the big market influence this week with the term countdown clock going to zero at month end.

This is the last big week for earnings reports. The cycle will trickle on for several more weeks but after this week the majority of the big names will have reported. There will be little positive anticipation to drive the markets higher after this week so last week's sell-off could easily be the beginning of a new market direction for awhile.

Headlining earnings this week are Apple, Amazon, Yahoo, CAT, MMM and UTX.

Apple reports earnings on Monday and hosts its unveiling of what is expected to be a tablet PC on Wednesday. Bernstein Research warned on Friday that expectations for Apple's iPhone sales could be too high. Bernstein expects Apple to announce sales of roughly 8.5 million phones compared to the 10-million consensus estimate. Apple earnings are expected to be $2.07 per share and a miss there could drive the Nasdaq through support into another dive.

So far this quarter 92 of the S&P-500 companies have reported and earnings are up +193% over nearly zero earnings of Q4-2008. However, if you take out the financials that impressive gain drops to only +7%.

Seventy eight percent of companies beat by an average of +21%. Only 17% missed earnings but more than 50% struggled with their guidance. S&P says the bottom line earnings are still improving due to continued cost cutting but the top line growth has been minimal. This week there are 12 Dow components and 130 S&P stocks reporting.

Between the winding down of earnings--investor sentiment seeing the glass 'half-full' on even the best announcements (remember Intel?) and the ever-wilder political gyrations to 'direct the voting public's attention'--there is not a lot of positive impetus for this market--but there are some serious negatives. Every time a politician tries to save themselves by proposing to punish the 'evil capitalists' (otherwise known as employers) the market is going to tank--and when that happens everybody loses. Unless of course you are an options trader.

HOW DO WE A MAKE MONEY ON IT?

We're already sitting on some outrageous open gains on our short positions--but it looks like there is more where that came from.

We've got two super set-ups this week--our first is a currency bet and our second is a bearish play on the small caps with a unique twist.

Both of them could easily result in 100% plus gains and it won't take much to make it happen--so let's get started...

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