Big Event this Week

8am In doing a little research this weekend (I'm a nerd, I do that) I found an interesting event that could be the trigger for the neck-breaking bear market (notice I said bear market) rally I have been talking about. There is going to be a House financial services subcommittee meeting this week. In that meeting, they are going to discuss changing or suspending the mark-to-market accounting rules that have caused a huge problem for the financials.

If mark-to-market is either suspended or changed in some way that benefits those "toxic" assets on the banks books, the whole market will change. If mark-to-market changes or goes away, the asset to leverage ratios change dramatically. The banks look much more healthy. More banks become solvent. More investors feel good about buying banks as long term investments. When more people start buying, the big money would have to cover shorts and the short covering rally would be dramatic. Of course, because of the weighting of financials in the indexes, other shorts will need to be covered. This could fuel the fire of a strong rally.

When a bubble pops, what previously worked never works as well when we recover. When the tech bubble popped, tech didn't lead us back to record levels. In the same way, financials will not lead us higher after this crisis is over. However, when we feel like the financials will at least be ok, we will feel safe about buying stocks in general again, and that is what we need more than anything. We need to feel better.

So, how do we make money on this? The trade I am going to give you is in the same spirit of the (DXO) trade I have had on for the last couple of weeks. I like the (FAS) ETF. It is a triple-long financial ETF. Friday's close was $2.64. If you put on a small speculative position in front of the House subcommittee meeting and the trade works, you can come out with a nice profit. If the trade doesn't work the downside is very limited. I like the risk-reward a lot here.

Don't waste your time buying options with this. The downside is limited enough and the ETF is triple long. You get a leveraged return. Besides, with options you limit your time horizon for the trade. With the ETF, you can hold on for as long as you need if the trade doesn't work.

To be fair, this was a trade mentioned by Jon Najarian on Fast Money on Friday. It wasn't an original thought of mine, but I do feel good endorsing it. I don't agree with everthing they say on the show, but that's what makes a market. Sometimes, people agree and other times people don't.

You now have a specualtive trade to start the week. Remember the trade is just that - speculative. Keep the position small. Be ready to move on news. And until next time, stay low risk.