After a very negative tone all morning, stocks have now increased their rate of decline to trade at session lows and the Dow is off 248.90 points to 11,379.16, for a loss of about 2%

Existing home sales were released at 10 AM, which showed that the number of homes sold in July rose 3.1% as homes become much more cheaper. Economists were forecasting a rise of 1.6%. With July’s number, we are now on an annualized pace for five million homes sold this year.

The number of homes for sale did continue to rise however. A rising inventory of homes will continue to depress prices, increasing Wall Street’s concern that the end is not near.

Financials are also weighing on the markets, with AIG (AIG) the biggest percentage loser in the Dow. The stock is now trading at $18.77, down $1.10 or 5.54%. JP Morgan (JPM) is the second biggest percentage loser, currently trading at $36.56, down $1.11 or 2.95%.

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Stocks are barely holding on to gains today after yesterday’s incredible run up. There is no doubt that with the decent earnings from Wells Fargo (WFC) yesterday and JP Morgan (JPM) today, some investors with short memories, might have forgotten that we are in a bear market. Bullish traders would like to see a decent follow-up to yesterday’s performance, to confirm a reversal in the downdraft that’s been hitting stocks lately.

The Dow which had been up as much as 112 points today, is now only up about 20 points. The Nasdaq, with disappointing earnings from Ebay weighing on techs, is in and out of positive territory and is now up just 3.57 points, while the S&P 500 is up 2.38 points.

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Yesterday, we posted an options trade to capitalize on JP Morgan’s earnings release today. As we expected, JP Morgan (JPM) beat earnings and the stock is up today. The trade called for 12 JPM Jul $32.50 calls and 8 JPM July 35 puts.

If the puts are worth anything at any point during the day, sell them and get what you can for them, they are worthless now. Exit the calls today as well. They are July options that expire this week. Place an order to sell the calls at $7.80. That would put us up over $85% on the trade overnight.

If by 2pm, you have not hit your sell price, or if it looks like the stock is falling from current prices, ($40.75)  exit before then.

Again, remember, these are July options, they expire tomorrow, get out today! If you’d like more winning trades like these, get a free two week trial to our Options Capitalist service. Go to http://www.navivest.com and follow link for services along top of page.

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JP Morgan (JPM) will be releasing earnings tomorrow before the market opens. We are putting up an options trade with the aim of earning 24% if JPM Morgan beats earnings. The company has been the standout brokerage in the carnage that has been the credit crisis and its possible they could have good news for the markets tomorrow. If they miss and the stock goes down, we’ve structure the trade so that we basically break. If they come out with good earnings, we earn 24% on just a 2 point move up and 45% on a three point move to the upside. The trade has to be placed today as they will report before market opens tomorrow.

Buy 12 JPM 32.50 Jul calls and buy 8 JPM Jul 35 puts.