Isn’t it amazing how quickly the market can change? After about six straight weeks of losses, the Dow did a sharp about-face and gained more than 276 points today. The catalyst that got shares climbing was Wells Fargo (NYSE: WFC), which pleasantly surprised everyone by beating earnings expectations.

Wells Fargo is the country’s fifth-largest bank, and like many other U.S. financial institutions, it has suffered from losses related to the subprime mortgage mess. But even though the company’s profits fell from the same quarter last year, Wall Street was thrilled that its losses were smaller than expected. Wells reported earnings per share of $0.53, which was slightly better than analysts’ consensus of $0.50.

The company also raised its quarterly dividend by 10%, which was welcome news after last week’s bank collapse scare involving Fannie Mae, Freddie Mac and IndyMac. Shares of WFC were up nearly 33% following the earnings report.

The earnings surprise also sparked a rally that was felt throughout the financial sector and the broader market. Many financial names that have been hurting for months were up today. But we need to be careful because some of the financials are still fraught with risk and danger, like Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), National City Corp. (NYSE: NCC), Washington Mutual (NYSE: WM) and Wachovia (NYSE: WB). If you own any of these stocks, I recommend that you sell them.

Our GameChangers in the financial sector, JP Morgan (NYSE: JPM) and Goldman Sachs (NYSE: GS), also popped in response to Wells Fargo’s numbers. JPM was up almost 16% and GS jumped nearly 10% on the day. I still believe these two are the cream of the financial crop, and they’re positioned to keep climbing in the months ahead.

Continue buying JPM under $52 and GS under $225. JP Morgan is scheduled to report earnings tomorrow before the market opens. I’ll be watching the numbers like a hawk, and I’ll be sure to update you on the quarterly report tomorrow.

In addition to the positive news from Wells Fargo, another reason the market took off today had to do with what’s called “naked shorting.” Yes, you read that right—I used the word “naked.” This is still a family investing service, so let me explain.

The practice of naked shorting is actually illegal, and yesterday the SEC said it would monitor and enforce the ban on it. I won’t go into all of the technical details, but essentially, it enables investors to disguise their intentions of shorting a stock or to short it without borrowing actual shares.

For example, say a hedge fund comes in and says, “Sell 200,000 shares of XYZ,” but doesn’t identify it as a short sale. Or, it does identify it as a short sale but does not secure the shares first. That’s a naked short, and firms have been very, very lax in enforcing the rules. This allows short-sellers to “pile on” and beat a stock down without mercy.

Stocks travel in the direction of their earnings. Higher earnings will eventually yield a higher stock price, and lower earnings will result in a lower stock price. What naked selling does is exacerbate that downward spin faster and deeper.

I’m convinced the sell-off in Fannie Mae and Freddie Mac was accelerated by naked shorting, and the SEC has said enough is enough. The SEC wants shorting rules especially enforced on 19 select stocks, all in the beaten-up financial sector.

So today, many institutional accounts were busy “covering” short positions, especially in financial stocks. Believe me, no one wants to aggravate the SEC or even appear on its radar screen. This added to the upward momentum as other institutions were outright buying financial stocks as long positions.

One other note: Intel reported a very good quarter. This may have been lost in the Wells Fargo news, but PC sales were strong as were notebook computer sales. This bodes well for our GameChanger Apple (NASDAQ: AAPL), which reports next week.