Understand Investor Response to News? Not Really! (EWJ, EWW)

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Includes: EWJ, EWW
by: David Fry

The news cycle and investor response to it can be bizarre and difficult to comprehend. Tuesday night, investors in Asia, well aware of Cisco earnings and after-hours trading in the US, crushed the Nikkei by nearly 3%.

But, in US trading with the yen relatively stable, EWJ only lost $.08 on the day. What’s the reason? Investors are always looking ahead. Obviously, investors believe that Tuesday's plunge in the Nikkei was just a one night event and things will improve today. Well, maybe.

So then Dave, if that’s the case how do you explain EWW? The major Mexican Index (IPC) fell by 1.37% while EWW was essentially flat. Further, the Mexican peso was unchanged and the market hours put trading there in the same news cycle as the US. So what gives? Um, I have no explanation.