BY Dennis Hobein:

Contributor, Stock Traders Daily

Real Time Trading Reports:  Included are detailed trading reports designed to help investors realize opportunities in these companies.  The reports are linked to the stock symbols in the article below.

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(La Jolla, CA)  Before the open this morning, the market was subjected to some disappointing economic data in the housing sector. Specifically, October housing starts came in far below the Street’s projection at 529K versus the 600K estimate. Additionally, building permits were much lower than expected, at 552K versus the consensus expectation of 580K. The headline numbers certainly indicate that housing is still a major sore-spot within the economy, which makes sense, because the market is oversaturated with foreclosed properties and mortgage delinquencies are at record levels. However, the data this morning also suggests that stabilization may have taken a step back. So, the question is then, why are housing stocks actually higher at the time of this writing, and why is the market in general shrugging off the bad data? Currently, the Diamonds Trust (NYSE: DIA) is essentially flat for the day.

Homebuilder Stocks Ignoring Data

Somewhat surprising is the fact that shares of some the largest homebuilders are actually trading higher this morning. For example, Hovnanian Enterprises (NYSE: HOV) is up about 1.5% to $4.30 per share, Lennar Corp (NYSE: LEN) is higher by 1.4% to $14.75, and Pulte Homes (NYSE: PHM) is up an amazing 5% this morning. For those interested in these stocks, we do provide free trading reports on these names which can be accessed by clicking on the ticker symbols. The reason for the stock action may be due to the belief that the poor housing reports are being looked at as more of a “blip on the radar.” If you recall, there was some uncertainty last month and in September regarding whether the first-time homebuyers credit would be extended. This likely caused homebuilders to sit on the sidelines in a “wait-and-see” mode before deciding to put up more houses. As we now know, the government not only extended the first-time homebuyers credit until April, but it is now also granting a $6,500 credit to those who have owned their primary residence for five years or more. Still, the housing market is in disarray, but the government programs should keep those housing statistics stable in the upcoming months.

Home Improvement Retailers Also Resilient

This week, we saw the third quarter results for home improvement retailers Home Depot (NYSE: HD) and Lowes (NYSE: LOW). HD’s report was solid as it beat the EPS consensus estimate by a nickel and issued upside earnings guidance for fiscal year 2010. Low’s results weren’t quite as good, with earnings and revenue both coming in-line with the Street’s estimates. By no means do these earnings reports suggest that growth is resuming in the home improvement sector – HD’s revenue dropped 8% year-over-year. But, again, there is and indication of stabilization. HD’s CEO commented on the third quarter conference call that even the areas hardest hit by the fall-out in housing – Arizona, California, Florida – are showing signs of improvement. From a technical perspective, shares of HD have been moving in a sideways fashion since about August, trading in a tight $25-$28 range. The stock is currently hovering just above its 50-day moving average, which is acting as support. For a more detailed trading plan on this stock, please click here. Traders and investors often find our reports as invaluable as they provide important risk control measures.