Monday 09/08/08 will turn out to be a very interesting day for the stock market. It certainly is a historic one and needless to say, the takeover of Fannie Mae (FNM) and Freddie Mac (FRE) by the government will dominate the financial news. While the shareholders of both companies will probably see their holdings lose considerable value, shares of other financial companies should rally, possibly giving a huge bullish boost to the overall stock market.

Unlike last Thursday and Friday when we had Initial Jobless Claims and Unemployment Rate reports respectively, that spooked the markets, the only economic news release due out today is Consumer Credit and that does not come out until 3 PM. So stocks will be free to move solely on the Fannie (FNM) and Freddie (FRE) news.

If Wall Street likes the news, then stocks unfortunately for traders not already positioned, will open higher. However, we might see a rally that lasts more than a day so there might still be time to profit from the news.

The Financial Select Sector SPDR (XLF) will probably be a good trade for the week. It currently trades at $21.74 and has had a problem breaking above $22 since July. This news will probably provide the impetus for it to break above this resistance area and once it does, we should see some follow through.

If financials rally on the Fannie (FNM) and Freddie (FRE) news, then we will be looking for XLF to move up to at least the $24 area. So if it is below that after the market opens on Monday, consider buying.