One of the things that might be confusing about the stock market for dummies is the closing price for stocks and the after hours price.
The closing price you see in the newspapers is the 4:00 PM price of the stock which is when the market officially closes. However, there is some after hours activity that normal investors like you and I don't get involved in. Usually this activity is not very important to the price of the stock unless some big earnings announcement is made or some big important news story happens after 4:00 PM.
The New York stock exchange, with the proliferation of news and people's access to it, has become a more global entity in recent years. The Internet and ease of making trades from anywhere in the world has contributed to this. Information of all sorts is available all the time to anyone who wants it and this means some changes were made in the after hours of the stock exchange. This means that there is now after hours activity and things going on behind the scenes that "normal" investors can't get involved with unless they know how.
If you have a stock that closes at 100 and then announces great earnings, you will see the price go up on all the tickers online and maybe on television. The next morning, even though the stock closed at 100 the day before, it may open much higher and you will have to buy it at that higher number. The same goes for bad news being announced as stocks can go down in after hours too.
By looking to see if there is any activity in a stock after the market closes, one can usually determine whether anything important has happened to the stock since the close. If you see the price of a stock being quoted higher or lower in after hours by a significant amount, it can often mean they announced great earnings or made some other important announcement like a merger or new product.
The after hours price of a stock is not something you should get too caught up in or worry about in my opinion. After all, you should be buying stocks as an investment and if a small movement in a stock's price after hours is going to influence your decision, then maybe you should find a stock where you expect bigger gains.
THE CLOSING PRICE AND AFTER HOURS PRICE: WHAT IS THE DIFFERENCE?
STOCKS GO UP, DOWN, UP, DOWN
Things seem to have stalled here lately in the stock market and we are seeing it go up one day and then right back down the next. You can see what I mean by looking at the 1 month chart of the Dow below:
There are many reasons for this up and down movement but what it probably signals the most is that investors are getting a little nervous. The market has moved up very steadily for about a year now all the way from it's low last year of just under 7,000 to over 11,200 a day or two ago. When the stock market continually goes up and back down for a period of time like it has it can mean that the steam has run out of the rally and investors are really torn at what to do. When people are selling one day, buying the next, and then selling the day after, it can mean there is a lot of confused people out there and a lot of differing opinions.
You can read Jim Jubak's opinion of the matter where he likens it from the mood changing from a half full glass outlook to a glass half empty outlook. Stocks just don't keep going up forever and there is always something around the corner that can stall momentum. The financial shenanigans in Greece seem to have helped make investors very nervous in a market that was already very high.
Why do stocks go up one day and down the next? Well, as I have written about before, the market moves on people's perceptions of what is happening and what they think will happen. It is all about whether people see positive or negative things in the future and right now it looks like there is possibly more negative than positive out there.
The Obama administration has this country in more debt than most people realize and that could become very troublesome down the line. If foreign investors start pulling out of America and don't buy up our ever increasing debt, where will that leave us? No stock market can withstand something like that.
This Stock Market For Dummies blog wonders whether it might be time to start selling a stock or two just in case? Maybe it is time to move some money out of stocks and put it into something safer for a while? The problem is that once you sell and get out it is very difficult to figure out when to buy back in again. However, maybe some safety is a good direction to go right now?
