Why did stocks open lower?

[MaryKay1965]

Can anyone explain to me why it seems that a ton of stocks seemed to open lower today (Tues.) than their closing price on Friday. It seems all of my stocks did this and while looking at various charts today, I noticed there were several stocks that seemed to take a dramatic dive south either at opening or that the MM opened the PPS significantly lower than the previous close price on Friday.

[netwrangler]

Can anyone explain to me why it seems that a ton of stocks seemed to open lower today (Tues.) than their closing price on Friday. It seems all of my stocks did this and while looking at various charts today, I noticed there were several stocks that seemed to take a dramatic dive south either at opening or that the MM opened the PPS significantly lower than the previous close price on Friday.MaryKay,

You can't be that clueless.
Did you happen to notice the trading in Asia yesterday when in US markets were closed?
Did you note the economic commentary about a 'recession' in the US?

So, can you really be that clueless? ...hard to believe.

[aiki14]

MaryKay,

You can't be that clueless.
Did you happen to notice the trading in Asia yesterday when in US markets were closed?
Did you note the economic commentary about a 'recession' in the US?

So, can you really be that clueless? ...hard to believe.

Net, as an empiricist, I offer 68 pieces of evidence upon which you can determine that.
http://www.onlinetradersforum.com/search.php?searchid=34072

Can you imagine having your money invested and being so disinterested that the economic news hasn't reached you? Sort of defies credulity doesn't it.

[MaryKay1965]

MaryKay,

You can't be that clueless.
Did you happen to notice the trading in Asia yesterday when in US markets were closed?
Did you note the economic commentary about a 'recession' in the US?

So, can you really be that clueless? ...hard to believe.

If you're not gonna answer my question without a smart ass remark, then don't bother responding. To give an example, I own RICK. The last PPS on Friday was $20.98, however the stock opened today at $20.00 PPS. The same will Medifast (MED), the closing price on Fri. was $4.30 PPS, and the open was $3.94 PPS.

I'm not talking about a stock that opens at the same price as the prior closing price, then immediately drops because of the recession we're in. I'm asking why the stocks immediately opened very much lower than the previous closing price.

So, if you know the answer, could you post it and if you don't know, but you are able to make smart ass remarks, please just keep them to yourself.

[MaryKay1965]

Net, as an empiricist, I offer 68 pieces of evidence upon which you can determine that.
http://www.onlinetradersforum.com/search.php?searchid=34072

Can you imagine having your money invested and being so disinterested that the economic news hasn't reached you? Sort of defies credulity doesn't it.

Aiki14, this link is dead.

[reef]

MaryKay,

You can't be that clueless.
Did you happen to notice the trading in Asia yesterday when in US markets were closed?
Did you note the economic commentary about a 'recession' in the US?

So, can you really be that clueless? ...hard to believe.

She is using the scam Marl for investing, so yes she is clueless. Might as well use a dart board.

[netwrangler]

If you're not gonna answer my question without a smart ass remark, then don't bother responding. To give an example, I own RICK. The last PPS on Friday was $20.98, however the stock opened today at $20.00 PPS. The same will Medifast (MED), the closing price on Fri. was $4.30 PPS, and the open was $3.94 PPS.

I'm not talking about a stock that opens at the same price as the prior closing price, then immediately drops because of the recession we're in. I'm asking why the stocks immediately opened very much lower than the previous closing price.

So, if you know the answer, could you post it and if you don't know, but you are able to make smart ass remarks, please just keep them to yourself.Your "dumb-ass" question got the "smart-ass" answer it deserved. Seemed like a good fit.

If you had asked the question above first, you might have received a different answer from me. I say 'might' because the answer is pretty close in content to my first answer, to wit:

News that broke while the US markets were closed changed investor sentiments and beliefs. That in turn caused the market to open lower than the last close. (Note: Stocks open higher or lower than their prior close most of the time. Opening at the prior close is, in fact, the rarity.)
As to why the two stocks you mentioned gapped down, I don't follow either of them. Since you say you own at least one, you might want to check Yahoo Finance or Google Finance and perform a little minimum DD on your investments.
I find it hard to believe you hadn't heard about the news I cited in my first response.
I find it hard to believe you don't know about Yahoo Finance and Google Finance
Therefore, I find it hard to believe that your original question was sincere.
Therefore, your original question deserved the answer I gave it.

You can't be that clueless. Indeed, I don't believe you are.
I believe you are gaming this forum to the detriment of the rest of the members.
Shame on you.

[MaryKay1965]

Your "dumb-ass" question got the "smart-ass" answer it deserved. Seemed like a good fit.

If you had asked the question above first, you might have received a different answer from me. I say 'might' because the answer is pretty close in content to my first answer, to wit:

News that broke while the US markets were closed changed investor sentiments and beliefs. That in turn caused the market to open lower than the last close. (Note: Stocks open higher or lower than their prior close most of the time. Opening at the prior close is, in fact, the rarity.)
As to why the two stocks you mentioned gapped down, I don't follow either of them. Since you say you own at least one, you might want to check Yahoo Finance or Google Finance and perform a little minimum DD on your investments.
I find it hard to believe you hadn't heard about the news I cited in my first response.
I find it hard to believe you don't know about Yahoo Finance and Google Finance
Therefore, I find it hard to believe that your original question was sincere.
Therefore, your original question deserved the answer I gave it.

You can't be that clueless. Indeed, I don't believe you are.
I believe you are gaming this forum to the detriment of the rest of the members.
Shame on you.

First of all, Net, my question was sincere. I am quite still a newbie. As far as the opening price being lower than the closing price, I don't normally see that. Most of the time the stocks I own open at or very near the closing price for the previous day.

So, are you saying that aftermarket trading is what caused the price drop of the opening PPS, or did the MM simply move the opening price down for some unknown reason?

Again, I understand if the price opens at the previous close price, but then moves south because of falling prices, I just don't quite understand how the opening price can immediately be lower than the closing price.

[netwrangler]

First of all, Net, my question was sincere. I am quite still a newbie. As far as the opening price being lower than the closing price, I don't normally see that. Most of the time the stocks I own open at or very near the closing price for the previous day.

So, are you saying that aftermarket trading is what caused the price drop of the opening PPS, or did the MM simply move the opening price down for some unknown reason?

Again, I understand if the price opens at the previous close price, but then moves south because of falling prices, I just don't quite understand how the opening price can immediately be lower than the closing price.Well, all righty then.

You really are that clueless. No offense intended here...seriously. We were all clueless about all things once. We all remain clueless about some things still. That's just how life works. I think we could describe the subject about which you are clueless here as "Gaps at the Open." Come to think of it, I was pretty much clueless about this subject myself just a few months ago.

That means that you did not ask a 'dumb-ass' question because, as my submarine shipmates would readily say, "There is no such thing as a stupid question if you don't know the answer." Please forgive me for the 'smart-ass' tone in my answer. Let's hit the rewind button and take it from the top.

During the week of Jan 14-18, the S&P500 lost 6.45%. During that week, both Bernanke and Bush talked about being ready with remedies to stave off the threat of inflation.

Across the oceans, that resonated as, "Holy Guacamole! The US is headed for a recession! Time to go to cash!" On Monday, while the US markets were closed, a lot of investors in Europe and Asia did just that. They don't close the exchanges in Europe and Asia for MLK-Day.

When the US exchanges opened on Tuesday, they had to deal with a market decrease that had occurred not so much in after hours trading as in regular hours trading in Asia and Europe while we were taking a holiday. The result was a %0.93 gap down from Friday's close on the S&P500, and that dropped to ~%3.85 down in the first five minutes of trading.

As for your two stocks, there may have been news about those stocks, but most likely any such news would have been overwhelmed by the tidal sweep of the broader market.

OK, let's go back to the submarine...

The reason that submarine "newbies" were encouraged to ask questions is that the safety of the boat could depend on what an individual crew member did or didn't know at crunch time. It was in our self-interest to make sure that everyone on board knew a lot.

The process for making that happen was called "Qualifying." Everyone on the boat was required to "qualify". On the diesel-electric boats that meant pretty much everything. I was a sonar-tech, but I could shoot a torpedo, start a Cummings diesel engine, or raise the snorkel if I had to. I certainly knew how to make coffee, and I damn well knew where all the valves and back-up valves were for hull penetrations — in every compartment. [On the nukes, I, being a 'forward puke', was not required to qualify on running the nuclear reactor.]

So we encouraged the newbies to ask questions, but usually we didn't just answer them. Rather, we told them where to look for the answer.

"Did you read the manual?"

"Did you follow the pipe hand over hand so you, personally, know, for sure, where it goes, how many valves and connections there are, and what their purposes are?"
This was my introduction to Due Diligence (DD). I embraced it as if my life depended upon it, which, in fact, it did.

I take almost the same attitude toward DD in investing and trading. True, my life is not dependent upon my financial DD, but my money is. That's not quite a 'vital' reason, but it's close enough.

So, back to gaps...

rkahn did a really nice job, back in November, of pulling together various references Technical Analysis books and other learning sources.

Here is a reference to that Technical Analysis thread. (http://www.onlinetradersforum.com/showthread.php?t=16071)

About half-way through the thread there are several posts about gaps and trading them. Some of those posts were mine. Others were from Luc1Grunt and Albert0373. For those of you who knew Grunt only as an Angry Young Man [everyone looks young from my perspective] I encourage you to read some of his posts where he was sharing knowledge rather than venting.

Outside of the OTF there are several "background" pieces published on gaps and why they occur.

Here is a link to one at StockCharts.com (http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:gaps_and_g ap_analysis)

The subject is still underanalyzed IMO — both on the OTF and on the Web. I encourage you to do some DD and then post some more on this subject. Might give us all some clues.

[MaryKay1965]

Well, all righty then.

You really are that clueless. No offense intended here...seriously. We were all clueless about all things once. We all remain clueless about some things still. That's just how life works. I think we could describe the subject about which you are clueless here as "Gaps at the Open." Come to think of it, I was pretty much clueless about this subject myself just a few months ago.

That means that you did not ask a 'dumb-ass' question because, as my submarine shipmates would readily say, "There is no such thing as a stupid question if you don't know the answer." Please forgive me for the 'smart-ass' tone in my answer. Let's hit the rewind button and take it from the top.

During the week of Jan 14-18, the S&P500 lost 6.45%. During that week, both Bernanke and Bush talked about being ready with remedies to stave off the threat of inflation.

Across the oceans, that resonated as, "Holy Guacamole! The US is headed for a recession! Time to go to cash!" On Monday, while the US markets were closed, a lot of investors in Europe and Asia did just that. They don't close the exchanges in Europe and Asia for MLK-Day.

When the US exchanges opened on Tuesday, they had to deal with a market decrease that had occurred not so much in after hours trading as in regular hours trading in Asia and Europe while we were taking a holiday. The result was a %0.93 gap down from Friday's close on the S&P500, and that dropped to ~%3.85 down in the first five minutes of trading.

As for your two stocks, there may have been news about those stocks, but most likely any such news would have been overwhelmed by the tidal sweep of the broader market.

OK, let's go back to the submarine...

The reason that submarine "newbies" were encouraged to ask questions is that the safety of the boat could depend on what an individual crew member did or didn't know at crunch time. It was in our self-interest to make sure that everyone on board knew a lot.

The process for making that happen was called "Qualifying." Everyone on the boat was required to "qualify". On the diesel-electric boats that meant pretty much everything. I was a sonar-tech, but I could shoot a torpedo, start a Cummings diesel engine, or raise the snorkel if I had to. I certainly knew how to make coffee, and I damn well knew where all the valves and back-up valves were for hull penetrations — in every compartment. [On the nukes, I, being a 'forward puke', was not required to qualify on running the nuclear reactor.]

So we encouraged the newbies to ask questions, but usually we didn't just answer them. Rather, we told them where to look for the answer.

"Did you read the manual?"

"Did you follow the pipe hand over hand so you, personally, know, for sure, where it goes, how many valves and connections there are, and what their purposes are?"
This was my introduction to Due Diligence (DD). I embraced it as if my life depended upon it, which, in fact, it did.

I take almost the same attitude toward DD in investing and trading. True, my life is not dependent upon my financial DD, but my money is. That's not quite a 'vital' reason, but it's close enough.

So, back to gaps...

rkahn did a really nice job, back in November, of pulling together various references Technical Analysis books and other learning sources.

Here is a reference to that Technical Analysis thread. (http://www.onlinetradersforum.com/showthread.php?t=16071)

About half-way through the thread there are several posts about gaps and trading them. Some of those posts were mine. Others were from Luc1Grunt and Albert0373. For those of you who knew Grunt only as an Angry Young Man [everyone looks young from my perspective] I encourage you to read some of his posts where he was sharing knowledge rather than venting.

Outside of the OTF there are several "background" pieces published on gaps and why they occur.

Here is a link to one at StockCharts.com (http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:gaps_and_g ap_analysis)

The subject is still underanalyzed IMO — both on the OTF and on the Web. I encourage you to do some DD and then post some more on this subject. Might give us all some clues.

Thank You so much for that very, very informative answer. It really cleared alot of questions for me. I had done the DD, before I asked the initial question, at least on the stocks I owned, and could not find any valid reasons for the dramatic drop in opening price vs. closing price (on Friday). I can grasp the theory of price increases (or decreases) during the aftermarket hours if news breaks after 4 PM, but again that did not seem to be the case here. However, you cleared up alot of my questions and gave great insight to what happened (across the pond.)

Hopefully, others will benefit from your knowledge by providing a very detailed explanation, as I'm sure there are some who noticed this also, but were maybe too embarrased to ask the same question.

P.S. Sorry about the former comments, it's just I thought I was getting plowed into because of the postings of DS and Marl, and I guess in a way I was. Anyhow, thanks for your responding to my question. Have a great day, Net. :D