We Can't Lose Housing

 | Sep 09, 2013 | 3:27 PM EDT
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Sure helps when you see PulteGroup (PHM), Lennar (LEN) and D.R. Horton (DHI) among the biggest gainers. These have been the Achilles' heel of the tape, the group that says, "The Fed can't save housing anymore."

Some of this may be that rates seem to have settled down, at least at higher levels. But some of it might be the muted reaction to the Hovnanian (HOV) statement that sales slowed in July and August. Maybe it's "in" the stocks? Isn't that what Hovnanian's stock is saying by not getting clobbered today?

I have been deeply suspicious of this group owing to the affordability index dropping like a stone of late. In fact, it's almost back to when housing was at its peak, despite the fact that the homebuilders keep saying the recovery's terrific. Now that we have confirmation that it isn't terrific from Hovnanian, do the homebuilders catch downgrades tomorrow? Or do the analysts say that the worst is over?

All I care about is that we don't lose housing altogether. Take Home Depot (HD). This stock can't get out of its own way. Today it is stronger, but the futures are dragging everything up off Syria making nice. It's obvious that Syrian President Assad knows that if we are going in we are going in to kill him and his leadership. He seems to have gotten religion about that.

Still, if we get housing back -- or at least if the stocks stop signaling bad tidings -- we could have another leg of this rally.

Do not forget that Restoration Hardware (RH) reports this week. This one is the highflier in the group.

It's richly valued and has run a lot, but the way to play this one is October 70 calls. What's a little premium among friends? It could be the Michael Kors (KORS) of the furniture business. It could be a great way to hedge against upside if you are short this group, like so many others I know.

Random Musings: The NAZZ really has game and I think selling some Oracle (ORCL) into this one might make sense. My stocks mentioned this weekend, the anointed ones, are almost entirely on fire.

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