New home sales figures were a big disappointment this morning but stocks are off their worst levels of the session. The NASDAQ is extending its gains and hitting new 2009 highs. The S&P 500 is flirting with a new high. The most bullish development today is the small cap Russell 2000 index breaking out past resistance and hitting new 2009 highs. Meanwhile dollar weakness is lifting commodities. Oil is also getting a boost from weaker inventory data.

Global markets were higher. The Chinese Shanghai index rose 0.7%. The Hong Kong Hang Seng climbed 1.1%. The Japanese markets were closed for holiday and will reopen on Thursday. Stocks continued their rally in Europe with most of the major bourses marking their third gain for the week. The Bank of England monetary policy committee voted unanimously to keep interest rates at 0.5% and keep the 200 billion pound quantitative easing policy in place. There is still some speculation that the England might increase its quantitative easing since their economy is officially still in recession. Unfortunately stocks retreated late in the session as investors reacted to the U.S. housing data. The German DAX index rose 0.2%. The French CAC-40 rose 0.3%. The English FTSE rose 0.8%.

Yesterday the market rallied on stronger than expected existing home sales figures although that number was skewed by buyers trying to close deals before the new buyer tax credit expired. Today's look at new home sales were a big disappointment. The Commerce Department said new home sales fell 11.3% in November. Economists were expecting new home sales pace to rise to 440,000. Instead November's sales came in at a seasonally adjusted pace of 355,000, from a downwardly revised October pace of 400,000.

The median price of a new home in November was $217,400. That's down 2% from a year ago but up about 4% from October. At the end of November the inventory of new homes stood at 235,000, which is the lowest level since April of 1971. Yet with the pace of new homes falling that's still an eight-month supply of inventory. The DJUSHB home construction index is off 0.02% at the moment but the sector (homebuilders) have been in rally mode for almost two weeks.

The Commerce Department also released personal income and spending figures. Personal income rallied at its fastest pace in months and spending increased for the second month in a row. Yet the numbers today came in worse than expectations. Personal income rose 0.4% and spending rose 0.5%.

The U.S. dollar slipped from 3 1/2 month highs giving commodities a boost. Gold futures bounced almost $9 to $1,095 an ounce. Crude oil was up 2.6% to $76.38 a barrel. The Energy Information Administration reported this morning that U.S. oil inventories fell 4.9 million barrels. Analysts were only expecting a drop of 3.7 million barrels.

Currently the best performers today are gold stocks with the XAU gold and silver index up 4.0% and the GDX gold miner ETF up 4.0%. The USO is up 3.2% and that's giving oil services a boost with the OSX index up 1.7%. The transports are flat but the DJUSRR railroad index is breaking out past significant resistance at the top of its multi-week trading range.

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

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