U.S. Housing and Japan Juice Up Markets

Wednesday brought another sleepy day to Wall Street as major U.S. indexes and ETFs advanced modestly while volatility, as measured by the VIX, continued to fall.

The big news today was more easing by the Bank of Japan and positive reports from the housing sector.

Oil was the day’s big loser as supply reports exceeded expectations.

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For the the day, the Dow Jones Industrial Average (NYSEARCA:DIA) added 0.1%, the Nasdaq 100 (NYSEARCA:QQQ) climbed 0.2%, the S&P 500 ((NYSEARCA:SPY) gained 0.12% and the Russell 2000 (NYSEARCA:IWM) lost 0.1%.

VIX, the CBOE S&P 500 Volatility Index, (NYSEARCA:VXX) declined again today, losing 2.1% to close at 13.88, and the index now stands at levels not seen since 2007.

August housing starts came in at 750,000, beating expectations and last month’s reading of 733,000 while August existing home sales hit 4.82 million, up from 4.47 million in July.  SPDR S&P Homebuilders Index ETF (NYSEARCA:XHB) advanced 1.76% on the positive news.

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But the big news came from overseas where the Bank of Japan added to its asset purchases with another round of $126 billion in easing.

On a technical basis, the uptrend remains intact as markets pause after recent significant gains.  Major indexes remain at overbought levels and so more consolidation or marginal declines could be expected.

Bottom line:  So now it seems that everyone, everywhere is easing and that the central banks of the world are working overtime to keep global growth intact.  Whether or not this effort will be successful remains a question which is the reason for the sleepiness in this week’s global markets.  Declining volatility would indicate that sophisticated market players feel more confident and are expressing reduced interest in paying for downside protection.  We’ll find out soon if  they’re correct or not.  If market participants are buying into the positive effects of QE3, we should see more “buy the dip” action and higher prices ahead.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.