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TheStreet.com's Jim Cramer is seeing signs of a coming boom, but he's still being cautious here.

If you had to define the early cycle, if you had to outline what stocks should be soaring coming out of a recession into a boom and which ones should be faltering, you would have to say the action in this market in the last month is the quintessential behavioral pattern.

What are the components of the early cycle? First, it's the homebuilders. As is typical coming out of a recession, the stocks precede the bottom of housing. That's exactly what's happening with the lowest permits and highest affordability and best mortgage rates and massive inventory. Everywhere, except on Wall Street reporting, the bottom is bursting out. When you read the lead story in the Sunday Philadelphia Inquirer, and it is all about the thousands of prospective homebuyers heading south to pick up condos and homes for half of what they were worth two years ago -- or even less -- and you know that virtually no one has broken ground in the Sunshine State in a year, you can bet that the bottom's actually behind us. This housing market has wiped out all but the most stable private builders and even the public ones are merging as we know from Pulte (NYSE: PHM) (Cramer's Take) and Centex (NYSE: CTX) (Cramer's Take). So, in the next cycle, you can see some profitability developing year over year even though the new homes don't have much margin because the foreclosed homes next door are going for a song. And don't believe this won't change the dynamic of future foreclosures. In most areas, rent is higher than the interest on mortgages, so you will find that second or third job needed to stay in your home. The incentive structure's radically different than a year ago.

TheStreet.com's Jim Cramer says builders have stopped, and prices have fallen to affordable levels.

Housing bottoms form when homebuilders finally stop building. They come when permits dry up. They come when foreclosures are so rife that they drive down the prices to affordable levels. Housing bottoms come when the homebuilders give up and merge. They come when mortgage rates go really low. They come when unemployment claims level out.

The bottom, well, is now. We are seeing a huge wave of buying of foreclosed homes in Northern and Southern California and in Florida. The numbers are too positive to think that these, the hardest-hit areas, aren't putting in long-term bottoms. Of course, where legacy housing is coming on, most notably in Florida and Las Vegas, where lenders like Corus Bank (NASDAQ: CORS) (Cramer's Take) abetted ridiculous levels of condominium construction, or New York, where the economy was on fire courtesy the brokers and the lawyers and the foreign tourists taking advantage of a cheap dollar, you are not going to get a bottom for a year. In New York's case, the building continued right through the layoffs because of tax advantages that ran out inopportunely right at the top. It will most likely be a tough market for a while.

Analyst upgrades:

• Jefferies upgraded HMS Holdings (NASDAQ: HMSY) to Buy from Hold on valuation as they believe the recent weakness provides an attractive entry point. The firm keeps a $36 price target on shares.
  
• Credit Suisse believes Universal Health (NYSE: UHS) is well positioned to gain market share, that earnings risk from the Las Vegas market is manageable, and that the balance sheet provides flexibility. The firm upgraded shares to Outperform from Neutral and raised their target to $48 from $46.
  
• UBS upgraded RF Micro (NASDAQ: RFMD) to Buy from Neutral citing checks that indicate strengthening momentum, impact from recent restructuring, and expected debt reduction. The analyst raised RFMD estimates above consensus and upped the price target to $3 from $1.10.
• Liberty Capital (NASDAQ: LCAPA) was upgraded to Buy from Hold at Deutsche Bank.
  
• Tesoro (NYSE: TSO) was raised to Hold from Sell at Soleil.
  
• SunTrust (NYSE: STI) was lifted at Keefe Bruyette to Outperform from Market Perform.

This was one of those days that if you just looked at a large group of stocks you would have no feel for the closing bell levels. The FOMC Minutes from the March 17 to March 18 meeting were given some of the blame for the late day sell-off, although if you have to read one-month old data to get insight into a post-Fed action event explaining it... then something is wrong.

Hence the late-day recovery after that. The reality is that traders are still using any excuse to take a profit or to lighten up after a four-week run, and there are still buyers out there to meet them. Here were today's unofficial closing bell levels:

Dow 7,837.11 +47.55 (0.61%)
S&P 500 825.16 +9.61 (1.18%)
Nasdaq 1,590.66 +29.05 (1.86%)

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Pulte (NYSE: PHM) and Centex (NYSE: CTX) agreed to merge, creating America's largest homebuilding company. CTX shareholders will receive 0.975 PHM common shares for each CTX they own. The combined company will have a market cap of $4.1B with $3.4B in cash on its balance sheet. PHM April option implied volatility is at 93, May is at 97; below its 26-week average of 102, according to Track Data, suggesting decreasing price movement.

Centex April option implied volatility is at 108, May is at 118; near its 26-week average according to Track Data, suggesting non-directional price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

TheStreet.com's Jim Cramer says this group simply refuses to merge, so you can safely sell them all.

One look at Toll Brothers' (NYSE: TOL) (Cramer's Take) quarter today tells us we aren't there yet. They still have plenty of money. They still have plenty of cancellations. They still need a tax credit for more business, which we know they aren't going to get because this administration doesn't want it. No bottom. In fact, Toll and all the others are still where they were a year ago. Independent, hanging on.

TheStreet.com's Jim Cramer says stocks you'd sell on America alone are buys when you consider that great engine in Asia.

Here's some real tension. The best stocks to play China with may be the worst stocks to own here. Look at Freeport (NYSE: FCX) (Cramer's Take) yesterday, which did that giant and hugely successful secondary. There is no doubt in my mind that housing starts won't even get to 600,000 this year, not after that travesty of a stimulus bill -- or when considering the reaction expressed by the stocks of Lennar (NYSE: LEN) (Cramer's Take) and Pulte (NYSE: PHM) (Cramer's Take) and, perhaps most hobbled, Centex (NYSE: CTX) (Cramer's Take).

There is also no doubt that China's stock market being up 35% means that Freeport's Asian arm, the biggest, will soon be getting huge orders.

Given last week's news that new home sales have plunged and that new home prices continue to fall, what is Wall Street expecting from homebuilders Centex Corp. (NYSE: CTX), Pulte Homes Inc. (NYSE: PHM), and DR Horton Inc. (NYSE: DHI) when they report quarterly results this week?

Analysts surveyed by Thomson Reuters anticipate that Dallas-based Centex will report that it narrowed its net loss in its fiscal third quarter to $3.27 per share. In the same period of last year, the loss was $7.94 per share. Revenue in the third quarter is expected to total $895.3 million, down 53.0% from last year. For the full year, the loss is expected to reach $7.36 per share on revenue of $4.0 billion, which compares to a $21.69 per share loss on $8.3 billion in sales in 2008. Centex has posted bigger-than-expected losses in the past five quarters. So the consensus recommendation of analysts remains to hold CTX, though the long-range EPS growth forecast is 9.0%. The share price has fallen 20.0% just since the beginning of the year, and it is 70.7% lower than it was a year ago. Centex suspended its quarterly dividends back in October.

The homebuilder's market has been hit pretty hard in the last 2 years by the resounding pop of the housing market, but at some point, they're due for a turn of fortune. If you're a strong believer in the recovery of the housing market and feel that the future for homebuilders appears bright, or at least brighter than it's been in the last few years, then here's an easy and efficient way to invest in the homebuilder's market.

SPDR S&P Homebuilders (NYSE: XHB) is an exchange traded fund (ETF) that seeks to replicate the performance of an index derived from the homebuilding segment of the U.S. total market composite index before expenses. Meaning, it's a way for you to invest in homebuilders and companies that support home building, across the board rather than trying to pick and choose a single company to hedge your bets with.

With an investment in XHB you'll get shares of noted representatives from that field such as Home Depot (NYSE: HD) and Lowes (NYSE: LOW), two well-known leaders in the home improvement retail field, Ethan Allen Interiors Inc. (NYSE: ETH) a home furnishing staple, Centex Corporation (NYSE: CTX) a homebuilding giant, and Leggett & Platt Inc. (NYSE: LEG) who produces components and products used worldwide in the creation of homes and furnishings. An obvious reach into every area of the homebuilding market, using some of the most trusted companies around.

Its anyone's guess when XHB will rise, but since the beginning of 2007, XHB has lost about 67% of its value.

For only a 0.35% fee the fund tracks the total return and performance of the S&P Homebuilders Select Industry index and derives the strongest basket of holdings. You'd pay up about 3-5 times that amount to have a money manager at a mutual fund provide the same results. Review the incredible diversity of XHP by examining its top 10 holdings listed below.

General Motors Corp. (NYSE: GM) and Ford Motor Co. (NYSE: F) may get help from the Bush administration. President Bush said in an interview today that "an abrupt bankruptcy for the autos could be devastating for the economy." He signaled he may use TARP funds for that, but didn't provide a timeline or other details. GM shares are up 4.8% in premarket, Ford's shares are up 2%. Shares of both opened about 3% higher.

Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) probably will report fourth-quarter losses this week on shrinking asset values and a decline in fees for businesses. But even the deep cost cutting measures the investment firms -- now turned banks -- may not help help shareholders enough as the companies face another year of slumping revenue. The demand for their services is and will continue to be limited in what is the worst financial crisis since the Great Depression. GS shares are down 2% in premarket trade.

Banco Santander (NYSE: STD), Nomura (NYSE: NMR) and Royal Bank of Scotland (NYSE: RBS) are among the victims ex-Nasdaq Chairman Bernard Madoff' $50 billion Ponzi scheme. Santander said its customers had an exposure of around $3.1 billion, while Japan's Nomura has an exposure of around $302 million. STD shares are down 1.5% and RBS shares up 1.7% in premarket trade.

[Update 10:00 am:
Huntsman Corp. (NYSE: HUN) shares were down about 35% a little after the open after it has ended its $6.5 billion agreement to be taken over by Hexion Specialty Chemicals Inc. and agreed to a $1 billion legal settlement.
Apple Inc. (NASDAQ: AAPL) shares were down about 4% a little after the open on a downgrade. Goldman Sachs downgraded the iPhone and Mac maker to Neutral from Buy due to deteriorating consumer spending.
JPMorgan (NYSE: JPM) shares slumped nearly 6% after a Merrill Lynch analyst downgraded JPM to Underperform from Neutral.
Honeywell (NYSE: HON) shares gained nearly 7.5% after the manufacturer affirmed a lower 2009 outlook and said it expects profits to fall 6% to 16% as the deepening global recession hits markets it serves.]

TheStreet.com's Jim Cramer says you just can't be as negative as you were before the latest actions.

It's been right to be more than the average bear for months now. But if you believe that housing played some role in the downturn, then you have to believe that the latest moves are very meaningful for that trashed market.

We have had two major problems in housing: affordability and the ease and cost of mortgage money. We got news this week that ameliorated both difficulties, and we cannot sniff at them as much as it has paid to sniff at everything else that has been done.

First, the government's buy of GSE paper revives a moribund market and ends a lot of federal indecision. If you recall when the government confiscated the Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) preferreds and therefore made FNM paper more dangerous, the government at the same time said that it would make mortgage rates come down, presumably by buying a ton of Fannie/Freddie paper. Instead it made a half-hearted effort by buying about $25 billion in paper and then disappeared!

TheStreet.com's Jim Cramer says tons of stocks look like good buys, and they go down all the time.

All weekend I heard it. Stocks have gotten too cheap. Put 'em away cheap. Don't worry about 'em cheap. To which I say, stocks are only cheap if the companies make it. Stocks are only cheap if the bondholders don't claim them.

Every day I see cheap stocks. Ford (NYSE: F) (Cramer's Take) reported this morning. Ridiculously cheap. How cheap is Sprint (NYSE: S) (Cramer's Take), for heaven's sake? Did you see the Sunrise Senior Living (NYSE: SRZ) (Cramer's Take) numbers? That stock should show up when you enter "cheap stock" in Google. Except Las Vegas Sands (NYSE: LVS) (Cramer's Take) comes up.

When Warren Buffett says stocks are cheap, or Jeremy Grantham or Steve Leuthold or Jeremy Siegel, it's very heartening. You just want to go out there and buy cheap stocks like CBS (NYSE: CBS) (Cramer's Take) and Williams-Sonoma (NYSE: WSM) (Cramer's Take) and Ann Taylor (NYSE: ANN) (Cramer's Take) and Talbots (NYSE: TLB) (Cramer's Take).

Recent reports reveal a surprising amount of criminal activity in the mortgage business. This is particularly true in states whose names end in the letter A, such as Florida and Nevada. Two particular forms of illegal behavior are the licensing of mortgage brokers with criminal records and homebuilders' use of bribes -- or 'incentives' -- to encourage people to buy over-priced houses without disclosing them to lenders as required by law. Think I'm kidding?

DSNews reports that last week, Florida's mortgage commissioner resigned after it was revealed that he granted mortgage brokerage licenses to people with criminal records. Specifically, DSNews wrote that Don Saxon, who had been Chairman of the Office of Financial Regulation (OFR) had "allowed more than 10,000 people with criminal histories – including bank robbers, racketeers, defrauders, embezzlers, identity thieves, and tax evaders, among others – to work in Florida's mortgage lending industry between 2000 and 2007. These convicted felons had expropriated more than $85 million from lenders and homeowners during that time."

Meanwhile, things were not much more legal in Nevada. That's where the Wall Street Journal reports that the Las Vegas, NV branch of home builder Centex (NYSE: CTX) paid off the credit cards and mortgages of potential borrowers to entice people to buy homes priced from $350,000 to $550,000. The FBI is investigating allegations that Centex did not always disclose these 'incentives' to lenders as required by law.

Are you waiting for the malaise in the housing market to finally lift? Of course you are, who isn't? I can't wait for the day when headline news suddenly turns unambiguously positive. And I can't wait for the day when the market as a whole decides to anticipate it. For now, though, we've still got sour data to contend with. According to this article, famous luxury home-builder Toll Brothers (NYSE: TOL), whose competitors include Centex (NYSE: CTX) and Lennar (NYSE: LEN), reported preliminary results for the third quarter on Wednesday that showed a big decrease in home-building revenues. They decreased 34%, coming in at roughly $796 million. Seems par for the course, all things considered.

But there are more declines. Backlog orders decreased over 50%, and net signed contracts took a dive of 35% (both of these metrics are in dollar terms). The company is also issuing write-downs that will fall somewhere between $100 million and $200 million. Depressing stats, but according to the company press release, CEO Robert I. Toll believes that there is pent-up demand lurking out there in the marketplace for homes and he used the fact that total cancellations were down during the quarter as a tool for positive spin. Plus, the home-building revenue number did, in fact, beat estimates, according to Reuters. Does this make me want to run out and buy the stock?

No. Even though the stock has been strong in the last month, and even though it was up nearly 1% at the end of the trading session on Wednesday (a pretty nice showing on an otherwise overall downer of a day), I don't think I'm ready to initiate a position in Toll Brothers. I'd have to see a significant pullback in this one before my interest becomes piqued (some better economic news wouldn't hurt, either).

Disclosure: I don't own any company mentioned; positions can change at any time.

TheStreet.com's Jim Cramer says they should be punished for trying an end run on taxpayers.

Love Centex (NYSE: CTX) (Cramer's Take), sell Horton (NYSE: DHI) (Cramer's Take)? That's how I feel after reading Horton's pathetic plea to bring back down-payment assistance for this industry, which remains unpunished for all it did to foment the housing crisis.

Yesterday, in one of our "Wall Street Confidential" series, I opined that Centex was shaping up to be one of the better builders after making so many right moves in the last year to preserve capital. I didn't care for industry leader D.R. Horton, though.

And that was before I read the outrageous comments from Horton CEO Don Tomnitz in Market Watch yesterday, where he decried that the new housing law didn't include more down-payment assistance loans from the FHA. These seller assistance loans plied basically, by the homebuilders that allow homebuyers to use a back door to FHA loans, have been defaulting at very high rates. The Congress, in an actual dollop of wisdom, scrapped them and instead gave people a tax credit of $7,500 to buy a new house, not bad considering that houses have retreated in value to the point that even though you need to put down more money as a percentage basis, as an absolute basis there's some affordability. This kind of loan is precisely what got us in trouble, an affordable loan that people ultimately couldn't afford that just helped Horton dump properties.