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Hold onto your seat belts, today should be very interesting.

The Dow is 138 points below its 200 dma of 10,937 so there is a ton of room to fly without even being a decent bounce while the S&P and the Nasdaq are hopelessly out of the money. The NYSE is the only index that really has a good shot of making a comeback but is 69 points from its 200 dma of 7,967. The Dow and the NYSE are the only indices that haven't had their 50s cross their 200s but both look to be heading that way. If they don't recover soon we could be heading into a major collapse.

Tokyo was not much help as the Nikkei pulled an anemic bounce last night. LG Electronics hurt tech more than Yahoo with a loss for the quarter where management is blaming declining margins on mobile phones and flat panel TVs. Let's understand what is really happening here, sales are up 20% but they are losing money because they are selling them too cheap. Sounds more like bad management to me but we will see what good management (MOT) can do in this environment later today.

I'm putting a lot more weight into IBM's positive numbers than Yahoo's disappointment because it is possible that Google is just kicking their butts or that they are simply failing to execute the best monetization of their search engine as they have done for 10 straight years. I love Yahoo, I think they're a great company but Google has clearly demonstrated what Yahoo could and should have been doing back when their stock was over $100 in 1999.

It's all about the CPI this morning and it will be all about the Fed this afternoon with an oil inventory report thrown in for good measure at 10:30 so, if you don't like the direction of the market, just wait an hour and it will likely change.

Oil will test $73 today but another drawdown will send it back towards $75 where we will test that. The 50 dma is $72 but recent dollar strength makes that meaningless as the dollar is up close to 5% since last week. Gold is down pretty much the same as the dollar is up but the last 2 days' action have tempered buying in Asia and it will be up to US traders to set direction.

On the whole, earnings are very strong but the market has been unforgiving to say the least. A lot of heavy hitters report today and tomorrow and it is possible that Bernanke can ignite a rally with some kind words. Remember the onus of the Fed is to borrow money for our massive debt and that job is being done by the unstable global situation, lessening the pressure on the Fed to raise rates to attract money. However, inflation is undeniably on the rise with the core number up to .3% for the month, way higher than the Fed's "comfort zone."

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If the markets open down, then I don't play anything as I still think a bottom may be near but if they hold up this morning there are a few interesting plays I am looking at:

WIT had great earnings with net up 45% and I like owning this stock for $11.70 and selling the Aug $12.50s for .50, an amazing annualized return.

JPM had spectactular earnings and have a very long way to go to get back on track. I like the Aug $42.50s for .55 but they may be $1 on a strong open. I would settle for .75 but I don't want to chase in this market.

YHOO may make a nice play if it holds $27.50 but it will make a tricky play. I'm inclined to pick up a 1/10 position on the Oct $27.50s on the opening drop and then giving it an hour or two to pick up my next 2/10 batch - perhaps in the next bracket either way if I have to.

UNH profits are up 26% so all may be forgiven and we will be very pleased with the Aug $50s we picked up yesterday for just $1.05!

Should TGT really be down below its 2004 mid point just because they "only" had a 3% increase in sales? Aug $45s seem reasonable at $1.65 if the market holds up today.

MOT Aug $20s for .45 could be the play of the day if they come in with good earnings.

I think Prof dumped his builder shorts right on the money as the housing starts are off less than 6% against builders that are down 60%. If there is a pause, we should get a nice rebound at least. The p/e of DHI is now 4 with the forward p/e (which assumes a much worse environment) of 6. RYL actually had a beat and gave positive guidance of all things! I like all the builders at this level for a long-term play but get right out if they go down any further (you could wait until Bernanke is done but risk missing a jump).

Another general play I like is the QQQQs at this level. Again this is just because we may be closer to a bottom than a top so I like the Aug $36s for $1.15 but getting out/not playing if the ETF goes below $36. If we have a big down move prior to Bernanke, I like them at whatever cheaper price on a gamble against a move up tomorrow.

Source: Options Trader: Wednesday Morning Ideas