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Two Ways To Play: Homebuilders Get Nailed


Strengthen your portfolio in good times and bad.

The Wall Street Journal reports home construction suffered a third consecutive drop during September, falling to its worst level in 17 years.

The Commerce Department said today housing starts fell 6.3% to a seasonally-adjusted annual rate of 817,000. This after after falling 6.2% in August and 12.9% in July.

Economists had expected a 1.7% drop in September to an annual rate of 880,000. This marks the lowest level since January 1991.

Housing starts, year-over-year, are 31% below the September 2007 levels. Today's data also showed an 8.3% decrease in building permits. Analysts, like Joshua Shapiro of MFR, continue to expect activity levels to fall in the months ahead - and for pricing to fall a great deal more.

From the Bull Pen: A timely mention by JPMorgan this morning of 16 stocks for a global recession. Among them is General Mills (GIS), which has been talked about many times in the 'Ville. But in the near term, bulls need to be conscious of $68 overhead resistance.

From the Bear Cave: We'll see rallies in stocks like Home Depot (HD), but bears know these are counter-trend. Consider a downside play if the stock can reach into the $23-$25 level.
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No positions in stocks mentioned.

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