When we refer to “The Market” we normally refer to the U.S. Market measured by the Dow Jones Industrial Average or DOW for short. This index measures the 30 largest and well-known companies such as: Coca-Cola, Exxon, IBM, etc..
The Market, is an auction where traders come together to buy or sell shares in companies, futures, commodities, bonds, and other investment items.
The most important indices that measure the markets are:
The DOWJIA (Down Jones Industrial Average): Measuring the 30 largest and well-known companies in the U.S.
The NASDAQ (National Association of Securities Dealers Automated Quotation system): Created the first electronic communications network for trading securities in 1971, now it provides up-to-date bid and ask prices on approximately 3,200 stocks. The NASDAQ is also known as the “Tech Index” because it measures the top Tech companies in the market.
The NYSE (New York Stock Exchange): Aka “Big Board”, the NYSE is responsible for over 90% of the volume of transactions on exchanges in 3,600 companies. There are 1,366 members also called “SEATS” (Stock Exchange Auction Trading System” It is usually the largest and most prestigious exchange in the market.
The S&P 500 (Standard & Poor’s 500 Composite Index): Measures 500 stocks of the largest companies based in the United States (can now contain foreign stocks). The S&P’s stocks are chosen based on their market size, liquidity, and industry group representation.
All trading was conducted on an exchange floor and trading was conducted using a “double auction” (Instead of the “one seller, multiple buyers” that you see at an estate or farm auction, for example)
There are “multiple sellers and multiple buyers”. Brokers on the floor call out prices & quantities, but due to both technology & the sheer massive volume of shares traded, things have changed most of the trading is now conducted electronically. Some large trades still involve significant human interaction, but they now consist of far less than 1% of the total number of trades
Bull vs Bear Markets
-Favorable markets normally associated with rising prices, investor optimism, economic recovery, and government stimulus
-Unfavorable market normally associated with falling prices, investor pessimism, economic slowdown, and government restraint
This is what a Bear/Bull Market looks in a graph
Take the Quiz Located Below the Video
Optional Video on the S&P: