Stock Market as a Teeter Totter

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I guess it’s a “no-brainer” to view the U.S. stock market or any country’s financial market as a child’s teeter totter. I use the MarketWatch.com web site to watch the stock market during the day. At the top of the webpage, just above the market charts, there is a linear graphic that displays the total  NYSE  (New York Stock Exchange) universe of 6,000 plus stocks.

Today (8/31/2015) is one of those days that the stock market looks like the drawing. Three thousand (3000 or so) stocks are on the “downside” or declining, and three thousand 3,000 or so) stocks are on the “upside” or advancing in the marketplace.  If there seems to be very little action in the market, the teeter totter is horizontal meaning level, I think of it as “biding time” or “waiting” for something to happen. Ha! as if enough has not happened recently, many stocks have had a 10% correct which is considered “bearish” meaning the “market” is moving toward a “bear market” vs. being in a “bull market”. For those who have not followed the U.S. stock market, it has been in a very bullish phase for about six (6) years now. A very long time in the opinion of many financial professionals.

The NYSE (New York Stock Exchange) by itself  had been around since 1792! Folklore tells the story of  “traders gathering under a tree at Wall Street and Broad Street to trade  in New York City .  The NYSE consists of over 6,000 corporations’ stock listings. You might still visit the NYSE in New York City to witness the “open outcry” system of trading stocks, however, thanks to high-speed computers much of contemporary stock, option, futures, and commodity trading takes place “over the wires” with ultra high-speed computers. There is talk of eliminating the trading pits and thus all trading will transpire strictly electronically. NO MORE HUMANS! Well, no humans on a trading floor. Everyone will be sitting at a desk and using several computer screens to track and trade financial instruments. Here’s an article from Reuter’s about the shut down of the Chicago Board of Trade’s trading pits.

The NYSE is now part of a group of exchanges. The group is called  the ICE Intercontinental Exchange.

In order for there to be a “trade”, there must be a buyer and a seller. So, one might say that when the teeter totter is level, the buyers (buy orders) and sellers (sell orders) match, i.e. buyer A wants to buy 500 shares of GE and seller B wants to sell 500 shares of GE. We’ve got a “match”, so there’s a completed transaction performed. What gets “sticky” is when there are more sellers than buyers. In other words, seller B wants to sell (or in a downward market, a better word might be “unload”) 5,000 shares of GE. Humm let’s make it 5,000,000 (yes that’s million) shares of GE and can’t find a buyer or buyers  for that amount of shares. That type of volume and dilemma may cause market volatility. The teeter totter loses equilibrium and “corrections” may develop in the general stock market. There are brokerage firms called “market makers”.  Investopedia has a very short video explaining the role of a market maker. It’s the “job” of a market maker to help alleviate the trading dilemma or “imbalance” that develops when there are too many buyers or sellers of a stock.

Author’s Note:  As of May 2016, unfortunately, the MarketWatch site no longer displays its information as I previously mention above. I miss the webpage design that was used. The “teeter totter” is no longer available to me as a visual indicator of the New York Stock Exchange’s activity. Such is life! Sometimes it changes for the better, sometimes for the worse.

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