The much-better-than-expected housing numbers caught the market by surprise and shifted the focus away from the weak earnings reports. Everything housing related, such as Lumber Liquidators (LL), Whirlpool (WHR), Home Depot (HD), Mohawk Industries (MHK) and PulteGroup (PHM), is running.
Once again, the bears, who were anticipating a failed oversold bounce, are being squeezed and underinvested bulls like me are trying to find some buys. I'm not shorting this market but I have too much cash and I haven't been able to put much to work. The buying is starting to slow and even if I could find the setups I like, it is tough to chase the indices here.
I've sold down some stocks I've mentioned recently, like Nam Tai (NTE), Cambrex (CBM) and Michael Kors (KORS). I still like all three and would remount on weakness. I have BioFuel Energy (BIOF) as a new technical buy, but it is choppy and not an easy hold.
We'll see how this housing rally goes. As long as the market finds other things to focus on like European bailouts and strong housing starts, it can ignore earnings, which have not looked very good so far. At some point, they will matter, but apparently not this morning.