The first full week of the second quarter earnings season is off to a strong start. Positive comments from influential Wall Street analyst Meredith Whitney launched a rally in financials. Meanwhile weakness in the U.S. dollar is fueling a rise in commodities and commodity related stocks. Oil remains the exception with another decline today.

Asian markets were weak. Investors ignored news that Japanese consumer sentiment improved in June. They also ignored a report that Japan's capacity utilization rose for the third month in a row. The Japanese NIKKEI index lost 2.5% marking its ninth decline in a row. The Chinese Shanghai index lost 1.0%. The Hong Kong Hang Seng fell to seven-week lows with a 2.5% loss.

It was a different story in Europe. Hope was rekindled that second quarter earnings might be better than expected financials and material stocks were leading the rebound. When news of Meredith Whitney's call on Goldman Sachs hit the wires the rally in Europe accelerated. The English FTSE gained 1.8%. The French CAC-40 gained 2.3%. The German DAX soared 3.1%.

Meredith Whitney's change of heart on the financials was the big story this morning. Several weeks ago she came out with some very negative comments about the financials and claims that the second quarter earnings season will be full of "manufactured" earnings results. Back then Meredith said that investors should not believe the results or invest in the sector based on most of 2009's earnings results suggesting any earnings improvement was fake or temporary. Today it sounds like she has changed her mind with a call that banks could see a 15% rally in the short-term before leveling off. Whitney also upgraded Goldman Sachs (GS) from a neutral to a buy rating just before their earnings report tomorrow.

Shares of GS are gapping higher on the news and they're currently up more than 5.3% as the stock soars toward resistance near $150.00. There is huge expectation for GS to deliver fantastic earnings numbers. The problem is that expectations are so high that the company is bound to disappoint. Or even if they do meet or exceed the whisper numbers that investors will believe that the results are unrepeatable and sell the news anyway. Really it seems like a lose-lose for GS no matter how wonderful their results are. The OptionInvestor.com newsletter suggested traders buy a strangle on GS ahead of earnings but last time we checked the company was supposed to report AFTER the closing bell on Tuesday (they did report after the close back in April). The company has now changed their earnings release to before the market open tomorrow morning. If you're going to launch a strangle you'll need to do it today before Monday's closing bell. I'd consider the $160 calls and 140 puts. However, an alternative strategy, would be to wait. Wait for an intraday spike tomorrow. The earnings results will be strong and the stock will probably spike intraday and then reverse. The $160 level looks like potential resistance. Look for an intraday spike toward $160 on Tuesday morning and then buy puts for an aggressive, higher-risk trade.

Goldman isn't the only big financial company reporting earnings this week. We'll hear form Bank of America (BAC), Citigroup (C) and J.P.Morgan Chase (JPM). The results and guidance from these companies will help set the tone for the third quarter. As of this afternoon the BKX and BIX banking indices are up 4.4% and 4.8%, respectively.

Elsewhere in the financial sector shares of CIT Group Inc. (CIT) are down about 12% around $1.35 a share but well off their lows of $1.08 this morning. Late Sunday night the company said it was talking with banking regulators on how it can improve its short-term liquidity. The company has been suffering from heavy loan losses. CIT has already received more than $2 billion in TARP money after converting to a bank-holding company to qualify for any bailout funds. The U.S. Treasury department claims that CIT is not a systemic risk, which would suggest they could let the company go under but comments out of Treasury Secretary Tim Geithner this morning sounded like they would try and save CIT.

Earnings are going to be the main driver this week but we will still have another round of economic data. Tuesday brings the PPI report and June's monthly retail sales figures. Wednesday will bring the CPI, capacity utilization and the industrial production numbers. On Thursday eyes will turn east toward China as the country reports their first take on second quarter GDP growth. On Friday the U.S. will report building permits and housing starts.

Currently the S&P 500 index is up 1.7% at 894 and nearing what could be round-number resistance at the 900 level. The NASDAQ composite is up 1.4% at 1781 and rising above its 50-dma. Look for potential resistance at the 1800 level. The Dow Industrials are up 1.6% at 8280. The small cap Russell 2000 is up 1.7% and nearing short-term resistance at 490.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

Scanning the OptionInvestor play list for movers today I see that the inverse ETFs SDS and SRS are naturally contracting with this market bounce. CLB, an oil service stock, is up 2.2% compared to a 0.4% rise in the OSX index. CMP has hit our first target at $47.50 after plunging to new lows this morning. MET is soaring 5% thanks to strength in the insurance sector but MET is now testing technical resistance at its 200-dma. With commodities bouncing shares of WY are up 3.1%.