Morning Movers

The futures were modestly higher prior to the release of economic data, and after the awful housing starts number, the markets turned lower. Dow dropped 58 points, S&P 500 4 points, and Nasdaq fell about 9 points.

SPDR S&P Homebuilders ETF (XHB), which tracks the homebuilders, was down 18 cents to $17.76 at time of writing.

IVX Volatility Monitor according to IVolatility:

• CBOE DJ Industrial Average Index (DJX) -5.2% to 22.1
• NASDAQ (NDX) -5.5% to 25.4
• Russell 2000 Index (RUT) -6.4% to 24.7
• SPDR Trust Unit (SPY) -5% to 24.8
• CBOE Russell 1000 Index (RUI) -6.5% to 25.3
• S&P 100 Index (OEX) -6.2% to 24.9

SPDR Homebuilder (XHB) closed at $17.42. XHB June put option implied volatility is at 39, September and December is at 42; above its 26-week average of 35 according to Track Data, suggesting larger price movement.

Update is by Stock Specialist Paul Foster of theflyonthewall.com

Whether you want to believe it or not, more indicators pop up each week that point to improvements in the housing market. Either we're at the bottom now, or we will be soon.

Of course, I just bought my first ever home in September of 2009 (a short-sale in Montgomery County, Md.) so perhaps I'm biased. But even in the worst markets there are signs of life in housing that should encourage investors and homebuyers alike.

Here are three top signs that the housing market has bottomed out.

The optimism on Wall Street about housing is surreal given all the public data on housing values, mortgage defaults, foreclosures and new home starts.

Housing prices are going to fall nationally for another couple of years as foreclosures hit 6-7 million in the next 30 months, and the 600,00 to 800,000 homes foreclosed but not yet listed are added to housing inventory. The headwinds created by this will last until foreclosures peak and those homes hit the market in late 2011 to mid-2012. Foreclosures will not hit historical norms until a year or two from that peak.

I love my country: the chaos, the hurly-burly of democracy, the hard work of quiet people and the great, big heart as shown by our private donations to Haiti at a time of near 20% unemployment and underemployment. We forgive wayward politicians and athletes, let our children make more decisions than virtually any people on Earth and we stand for something -- a true city on a hill. But right now, that city is in political chaos ... and pretty broke.

Although, I don't like to say it, it is time to short the United States.

The biggest bunch of turkeys out there is homebuilders (actually, a group of turkeys is known as a rafter or gang).

President Obama just signed the Worker, Homeownership and Business Assistance Act of 2009 into law, which renewed the first-time homebuyer tax credit until next April. This bill also gives tax breaks to big companies to offset losses in the past two years, and the homebuilders will be among the biggest beneficiaries. Looks like Congress found another great way to spend our tax dollars!

Whether the market can keep pushing higher in 2010 despite our shaky economy is anyone's guess, but we hope that this rally has helped you recoup from some of the devastating losses most people experienced in 2008.

In the spirit of Thanksgiving, we want to give you six more reasons to be thankful this year. So we've put together a list six trades that should lead you to some very tasty profits in the near future.

The SPDR S&P Homebuilders ETF (NYSE: XHB) bottomed in March and made a direct run to the 200-day moving average by the end of April.

In mid-July, it executed a gold cross, which indicated that its long-term trend was about to change. By early August, it had broken the high of July, establishing an uptrend.

Since then it has been trading within a bull channel, but recently broke the 50-day moving average (blue line) suggesting that XHB will head for the support line and 200-day moving average at around $12.50.

When selecting which stocks to buy, ratings from agencies like Standard & Poor's can be useful in creating a balanced portfolio.

But did you know technical analysis is the most accurate way to predict where a stock -- or the market for that matter -- is going?

Technical analysis is more of an art than a science, but when used correctly it can boost your profits to new heights. I took a look at stocks that S&P has a four- or five-star rating on and analyzed their charts to come up with six great technical trades for you.

TheStreet.com's Jim Cramer does not agree with one group's idea the housing market will be hit by a glut of foreclosed homes.

Until last night, when I thought of "Amherst" I thought of a school that my eldest daughter debated applying to. Not anymore. Nope. Now there's a new Amherst in town -- Amherst Securities. Last night this firm, which trades mortgage-backed securities, became the new expert on housing when it issued a report saying that we were going to have another leg down because the market is about to get hit by 7 million foreclosed homes.

Downbeat. Horrible. Sell the homebuilders. Sell the banks. Huge wave of foreclosures coming.

Yeah.

Got it.

Shares in homebuilder KB Home (NYSE: KBH) dropped more than 8% as of mid-day Friday following the company's earnings release. Earnings per share for the quarter ending May 31 were a loss of $1.03, or $78.4 million, on $384.5 million in revenue, compared to the $0.64 average loss expected from analysts. The expected earnings range was between a $0.03 and a $1.40 loss, reflecting uncertainty about the writedowns needed on home inventories, land, and joint ventures.

When the housing market was at its peak in 2006, KB Home's sales topped $3 billion in one quarter. The company has struggled since, as the worst housing market in generations has led to a decline in housing starts of more than 75% from the peak to the present.

The major indices continued to rally into the close Monday, after spending most of the day down substantially. The Dow ended the day up fractionally and the S&P 500 was down less than one point. Institutional money continues to enter the markets, says Jim Cramer, and that has limited the size and duration of pullbacks.

Even as the uncertainty comes out of the markets, the clarity that replaces it is tepid at best. But with the S&P 500 resting at seven-month highs, one troublesome sector has badly lagged: housing and home-building stocks.

If you have been waiting and hoping for a pullback of any size, the moves here are probably starting to make as much sense as using the notion that you should buy just because a company is keeping the same dividend it has always had. The markets screamed higher again today on the heels of some very solid housing data and that has the bulls firmly in charge again. In turn, market bears are becoming about as popular today as management of troubled banks. Here were today's unofficial closing bell levels:

Dow 8,410.81 +198.40 (2.42%)
S&P 500 907.24 +29.72 (3.39%)
Nasdaq 1,763.56 +44.36 (2.58%)

Top Analyst Upgrades and Downgrades

Minyanville Professor Quint Tatro dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

There are a few things I am watching for today to give me better clues as to the internal character of the market.

Wal-Mart (NYSE: WMT): It's off on retail numbers after the stock broke out of a four-month consolidation pattern on good volume. If the stock catches a bid, it is an indication that institutional investors are back stalking retail plays and would be bullish for the general market.

Energy ETF (AMEX: XLE): Energy has recently broken a longer term trend going back to mid-2006. It is bouncing off recent lows on very light volume. If money continues to rotate out of this sector, finding a home in the likes of retail, housing and financials, again a bullish sign. I initiated a short position in XLE this morning.

Financial ETF (AMEX: XLF): Financials have been and will continue to be the key to the market's future. After recapturing the 50-day moving average, this ETF is being brought down by AIG (AIG) and needs to regain its footing. Some consolidation is fine, but anything back below $20 would have me heading back towards the bunker.

Homebuilders ETF (AMEX: XHB): The homebuilders continue to perk up and also remain a key to the future of the tape. They are probing green today above their 50-day moving average on decent early volume. A break here above yesterday's high going on to attack the $19.00 level is also a bullish sign.

These are things I am watching for which will give me my clues to start wading back into the market with real capital.

(Prof. Tatro has positions in WMT, XLE, XLF, XHB).

I've told BloggingStocks readers several times to sit and wait on the home builders, at least for the time being, because the news flow coming from the group remains overwhelmingly negative. This thesis is not very contrarian, in fact it seems to be the going opinion on Wall Street, but more importantly it's the only take that makes sense to me at this point simply because I think the real estate markets became so overheated several years ago that the diffusal period for this bubble is not over yet.

Today another piece of news quantified this theory -- the New Home Sentiment Index. This index is a measure of builder's attitudes towards the current market. This month the figure came in at 24, the lowest reading since January 1991. This was significantly worse than the expectations for a reading of 27.

As a result of higher mortgage rates (30 year mortgage rates sitting right around year's high), the demand for big home builders decreases according to the AP report. In addition, although the National Association of Realtors is expecting an increase in new home sales next year, they still expect the total figure to be below 2006 levels.

Although all this news could be indicating a bottoming-out in the homebuilding sector, I still think it's too risky to jump in unless an investor tries to hedge out short term risk. He could do this either by purchasing puts on homebuilding stocks he owns or by shorting the Streettracks Homebuilder ETF (AMEX: XHB) if he believes his favorite homebuilder is superior to the average.