Shares of J. Crew Group Inc. (JCG) have fallen sharply in heavy after-hours trading. After the close, the retailer reported second-quarter net income of $18.1 million, or 28 cents per diluted share, down from $20.6 million, or 32 cents a share, a year earlier. The results were below the Street view of 32 cents a share.

Revenues rose 10% to $336.3 million.

The company also lowered its guidance for fiscal 2008, due to the troubling macroeconomic environment and the disruption caused by a systems upgrade.

For fiscal 2008, it now expects diluted earnings per share of $1.44 to $1.54, down from previous guidance of $1.70 to $1.75.

Using history as a guide, shares of JCG tend to fall further the next day following a drop in after-hours trading on an earnings disappointment. Late traders can take advantage of any rise to the $23.50 area,  the high end of the post annoucement price range.  The chart below shows the price activity after the close this evening. Watch out below!

Fannie Mae (FNM) and Freddie Mac (FRE) are posting strong gains in early trading after strong demand for its bonds restored confidence in the trouble purchasers of home mortgages. Don't get suckered into this one on the long side.

Fannie Mae is up more than 17% in early trading and Freddie Mac is up more than 20% at $4.06, marking the second day of huge upside for the stocks. Never before in recent days have we seen a better short.

The stock is also getting some lift from a new Citigroup equity research report that said the two companies have enough capital to absorb probable losses through the end of the year. How is that news worth cheering?

The report is further evidence that a government bailout is unlikely. Rumors of a possible takeover, which would have severely impacted shareholder equity, helped ignite the financial stock sell-off.

Estimated third and fourth quarter revenue of $7.5 billion for Fannie Mae and $5.5 billion for Freddie Mac would cover likely losses of $1.5 billion and $1.2 billion, Citigroup said, according to Reuters.

The excess capital over minimums in the second half of the year would total $20.3 billion for Fannie Mae and $12.7 billion for Freddie Mac, Reuters reported.

If you need some shorts to balance a long portfolio, there are few better options out there for those that can stomach the volatility.

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Last week was all about Fannie Mae (FNM) and Freddie Mac (FRE) and this week will be all about technology stocks. Investors have started to move money into the technology sector and out of financials as concerns over the future of Fannie and Freddie loom. If you're waiting for a good time to jump into the tech action, this may be the week to do it.

Dell Inc. (DELL) reports its second quarter earnings after the bell Thursday and analysts polled by Thomson Reuters expect the software maker to report a 13% jump in earnings of $0.36 per share on an 8% rise in revenue of $15.9 billion compared with the same quarter last year. The company impressed investors last quarter when it beat the street with cost-cutting efforts and strong notebook sales. As a result, shares rose 9.4% in after-hours trading and narrowed that gain the following trading day, closing up 5.7%. So, how do you play this stock into earnings? In the long-term, shares are mixed with a tendency to narrow after-hours moves in next-day regular session trade following half of its last 18 earnings events. If the company beats the Street, longs may want to just take their profit at the open.

Also after the close on Thursday, Marvell Technology Group Ltd. (MRVL) reports its second-quarter results. Analysts are betting that the maker of microchips used in iPhones will have a stellar quarter, posting a 250% jump in earnings per share of $0.21 on a 27% rise in revenue of $836.7 million. That kind of growth may be achieved if Apple Inc.'s (AAPL) 3G iPhone has done as well as many analysts expect. If you're long this stock, you may want to hold your position into next day. The stock has a near-term tendency to widen its moves in the following regular session, doing so three out of the past four quarter.

Novell Inc. (NOVL) is set to report third-quarter results after the close of trade on Thursday. The software maker's shares have been bouncing between $6 and $8 per share for a year and recently dipped below $6, so shares may have room to move higher. Analysts have very conservative estimates for company, predicting flat earnings of $0.05 per share and a 1% decline in revenue of $241.4 million, compared with a year ago. The stock is a strong performer between the sessions, demonstrating a consistent tendency to see wider next-day movement following its earnings events, posting more aggressive next day trade following 13 of the last 17 after-hours earnings events MidnightTrader.com has tracked. In the near-term, the stock is maintaining its widening trend, adding to its after-hours performance in next-day trade in three of the last four events. On May 29, 2008, the stock rose 0.6% in after-hours trading after its second-quarter results beat the street. The stock widened its move in the following regular session, ending higher by 5.5%.

Not surprisingly, the financials are picking up steam this morning on the heels of news that Lehman Bros. Holdings Inc. (LEH) could be bought out, resolving another problematic piece of the credit crisis.

With most of the uncertainty priced into the sector at this point, the risk reward ration looks promising. In other words, the downside appears limited compared to the likely upside.

In pre market trading today, shares of LEH were up nearly 15%. The Ultra Financials ProShares (UYG) moved up 7% ahed of the opening bell and has added to those gains in regular session trading.

A two day chart of UYG below with the lighter shaded areas representing the after-hours and pre-market respectively.

I made the call to pick up shares of UYG in the pre market (or regular session) yesterday. We've gotten tons of emails from subscribers wondering if its too late to buy into the rally. In short, it's not. However, I'd suggest a protective stop on the UYG postion at 18.76.

Deja vu. The broad market is again fretting about both Freddie Mac (FRE) and Fannie Mae (FNM). Both issues have seen a sharp pre market spike in  negative momentum, driving FNM down from 4.18 to a recent low of 3.86. FRE is down from 3.07 to a new session low of 2.86. The likely result is already playing out, a weak session for the broader sector.

Rather than playing individual names which can be subject to additional volatility based on speculation or company specific news, etc., consider a financial ETF. 

If you're playing the long side, take a look at the Ultra Financial ProShares (UYG). Ultra Financials ProShares seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Dow Jones U.S. Financials Index. So, if you're bullish on the sector, there's no better play than getting 2x the exposure for each dollar invested. 

With the ETF a stone's throw from all time lows, now may be the time to start dipping your toes in the banking waters.

Ahead of the opening bell, shares of UYG are trading well off their close from yesterday, down 3.5% to 18.95 in active pre market trading.

Last week, the consumer price index proved that inflation is heating up and retailers are starting to raise prices. With the exception of warehouse clubs and off-price retailers including BJ's Wholesale Club (BJ) and Ross Stores Inc. (ROST) retail earnings this week are likely to be dismal, but may be better than some analysts expect. Gap Inc. (GPS), Saks Inc. (SKS), and Limited Brands Inc, (LTD) are all expected to report a drop in sales in the second-quarter, more evidence that consumers are flocking to discount stores such as Wal-Mart Stores Inc. (WMT). Even Target Corp. (TGT), which touts trendy clothes and low-prices, is expected to report a 5% drop in quarterly sales.

Besides retailers, this week will offer up a number of technology, computer and internet companies. But Monday and Tuesday will bring the two largest home-improvement chains.

On Monday, get set to hear from Lowe's Companies Inc. (LOW) before the bell. The second-largest home improvement reports quarterly results one day ahead of larger rival Home Depot (HD). Lowe's is expected to report second-quarter earnings of $0.56 per share on revenue of $14.1 billion, according to Reuters Estimates. If you're short, you may want to cover at the start of the regular session as this stock has a tendency to narrow its pre-market moves in the regular session, doing so in four of the last seven quarters we've tracked. On May 19, 2008, Lowe's fell 3.6% in pre-market trade after the company's first-quarter earnings beat by a penny a share and revenue missed. It narrowed its losses in that day's regular session, closing with a 2.6% decline.

On Tuesday, Hewlett-Packard Co. (HPQ) releases its results after the close. In the near-term, H-P has narrowed three out of the past four quarters between the after-hours and next day regular session after an earnings event. In the long-term, H-P is split between widening and narrowing its share move between the after-hours and next day regular session after an earnings event. It has moved more aggressively in the same direction the next day in ten of 17 quarters. On May 20, 2008, H-P fell 0.5% in after-hours trading after topping estimates and guiding in-line with the Street. It widened its losses the following regular session, closing down 3.6%.

On Wednesday, Salesforce.com, Inc. (CRM) reports after the close of trading. This is a stock that likes to reverse between sessions. Shares just favor a narrowing trend between the bells following its after-hours earnings reports, narrowing or reversing eight times and widening six times in next-day trade following its last 14 extended-hours earnings reports. In the near-term, the stock has reversed three out of the past four quarter. On May 21, 2008, Salesforce.com fell 0.6% in after-hours trading after its first-quarter results beat the Street. It reversed course the following day, ending higher by 5.8%.

There has never been a better time to find earnings event related trading opportunities. In both up and down markets there are some great trading opportunities during earnings season. No better time than now to listen to how to best take advantage of earnings season trades while the markets are underwater.

Please join us today, Tuesday, August 12th at 4:30 p.m. EST for a free online seminar on finding earnings event related trading opportunities. Using prior analysis of historical price action data in the pre, post and regular trading day surrounding a stock's earnings news, we're able to predict how stocks are likely to react in their earnings season and by how much and in what direction. In a nutshell we've turned earnings events into trading opportunities. Find out more about this powerful service by attending this FREE webinar.

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In today's seminar we'll cover the art of earnings event trading and show you how real-time stock news can help in identifying and trading these events each quarter. Hope to see you there!

Stocks managed to end the week higher despite a sell-off mid-week after American International Group Inc. (AIG) reported a $5.4 billion quarterly loss, reigniting fears over the housing market and credit crisis. Freddie Mac (FRE) and Fannie Mae (FNM) added to the pressure after the government-sponsored enterprises reported losses more than three times what analysts expected.

This week, look for quarterly results from a number of technology companies and retailers. On Thursday, retailers should set the tone for trading as investors hear quarterly results from Kohl's Corp. (KSS), Nordstrom Inc. (JWN) and Wal-Mart Stores (WMT). Investors will also be closely watching for July's Consumer Price Index released Thursday morning at 8:30 a.m. EDT. With the index up 5% for the year ending June 30, retailers are likely to post smaller profits as they continue to face pressure from rising raw material costs and the limited ability to raise prices.

On Tuesday, Applied Materials Inc. (AMAT) releases its third-quarter results after the close and analysts polled by Thomson Financial are expecting the second-largest microprocessor maker behind Intel Corp. (INTC) to report a 60% decline in profit of $0.14 per share on revenue of $1.84 billion. The stock has a tendency to narrow its after-hours movements the next day following an evening earnings event. If the stock rallies in the pre-market, longs may want to take their profits before the open. The stock has narrowed its moves after 11 of the last 16 earnings events. However, the near-term performance is mixed, with the stock widening its move twice, narrowing once and reversing once in the past four quarters. On May 13, 2008, Applied Materials jumped 1.5% after the close after it beat on revenue and profit, however the company's guidance disappointed investors and the stock narrowed its gains the following day, up 0.2%.

Also Tuesday, look for results from chip-maker NVIDIA Corporation (NVDA). The company is expected to report a 65% drop in second-quarter earnings of $0.14 per share on revenue of 908.4 million. This stock may be a tough one to play. Shares generally favor a narrowing pattern between its after-hours move and the next day session following an evening earnings event. It has narrowed or reversed its next-day price movement 11 times and has widened its next-day movement seven. The near-term performance favors a reversing trend, with three reversing moves and one widening move on the books for the most recent four quarters.

Wal-Mart is expected to report its second-quarter results ahead of Thursday's opening bell, and analysts polled by Thomson Financial expect the world's largest retailer to post a 17% increase in profit of $0.84 per share on revenue of $101.7 billion. If the stock falls in the pre-market, longs should probably cover and shorts should take the lead, as the stock has a recent tendency to widen its pre-market moves, doing so three out of the past four quarters. Over the long term, the stock has seen seven instances of adding to its pre-bell trade in follow-on regular session action and six events where the stock narrowed. On May 13, 2008, the company reported first-quarter results that beat the Street but gave a cautious outlook for the remainder of the year. As a result, shares fell 1.2% in the pre-market and widened their move in the regular session, ending down 2.4%.