Last(ing) Impressions: Closing Market Prices

Closing Price. Those words hang over every business day like Damocles’ dagger, considered by the public at large as a sacrosanct indicator of the stock market’s performance. The finality of the closing price confers upon it a huge amount of symbolic importance.

Secondary market sentiment as it relates to price trending is determined in large part by the market’s standing at closing bell. With nerves running high over concerns related to the U.S. financial troubles, Greece’s fiscal meltdown and the EU’s >increasing general instability, analysis of market closes has become ever more significant in sectors public and private.

The American, New York, and NASDAQ stock exchanges trade from 9:30am to 4:00pm, and their closing prices reflect the price at which a stock last trades during that time. Other exchanges, however, trade over an extended period of time and may offer post-market statistics or a cross-section of regular trading hours and afterhours numbers as their closing prices.

March has seen a small but significant >global market rally with gains made mainly in U.S. technology stocks like burgeoning solar and ever-popular cellular service providers, while outlet titan J. C. Penny saw another weak month in the exchange.

The calculation of closing prices, even for national and international markets, can be difficult to determine. Opening price, due to market-conscious modifying factors like the NASDAQ Cross which optimize prices based on the number and nature of afterhours buy/sell orders, may be a better indicator of overall market health.

Further layers of complication ensue when one considers the tendency many publications have to jump the gun on closing quotes in the interest of promptness. Failure to include important information, like afterhours trading rates and the various formulae a market might use to determine a stock’s closing prices, can lead to confusion over what closing prices actually are.

The closing quote for NASDAQ and the other big boys has an almost mythical significance to market analysts, and many websites, blogs and organizations exist solely to >track closing quotes for commodities and from market to market. As a part of any stock’s range they form a particular and highly prioritized body of information for dissemination and analysis, along with high and low points and opening prices. A stock’s closing price represents a point of stability in the otherwise fluid market, a convenient post for prediction of future pricing trends and analysis of past performance.

A rally before market closing can restore a disproportionate amount of faith in investors. The reverse, as in the case of 2010’s >disastrous day in late October when the opening bell rang in a massive selloff due to the market’s failure to rally over the previous three days, is also tangibly true and demonstrable. Before eleven o’clock on the 28th of October blocks of anywhere from five to twenty thousand shares were being dumped at cut-rate prices by panicky shareholders.

The market took a devastating hit as, heedless of any concerns other than divesting stock soon feared to be untenable, investors shucked somewhere between eight and nine billion dollars worth of shares. A last-minute rally, however, alleviated the crushing blow as eager opportunists took advantage of rock-bottom prices to snap up huge blocks of shares, giving the market a 14-point bump in its last fifteen minutes of trading.

The October 28th debacle and its mitigation represent a broad trend in market analysis. Stability, the isolation of discrete moments within an amorphous whole, showcase a tendency for exchange analysts to idealize the comprehensible and reject the insensate. As a sea of difficult-to-predict events, as discrete from one another as drops of water in a glass, the various exchanges must be approached on their own terms even with the limited analytic equipment available.