T Nation

Stock Question


#1

I have been reading up on investing and how to pick stocks and have noticed that the stock market is going through drastic changes. My question is when NASDAQ rises say 300 points what does that mean for the person investing?


#2

It means you need to go back and study some more.

From one perspective, there are two general schools of thought in the "investing" world. The fundamentalists are concerned with the quality of each company in terms of their financials (or fundamentals.) The chartists are less concerned about the fundamental quality of a company and believe you can tell almost everything from analysis of the price and volume movements of the stock over time. (This is also called Technical Analysis.)

In a general and narrow POV, you would think a 300 point advance in a market like the NASDAQ would be a good thing, but it actually depends on your viewpoint and analysis of other factors. It has to be interpreted in context.


#3

It simply means that the Nasdaq Composite was up 300 points, no more no less. In a nutshell, the comp is comprised of over 4k companies, and it's a market cap weighted index, so the greater the market cap of the stock, the more weight it has in determining the amount of points the comp is up/down.

As for what it means to the investor, that's impossible to say without knowing what the investor has for holdings, but generally speaking a 300 point up day is good for investors, since they're typically long side biased and a move of that magnitude will bring most issues up with it. If you want a great financial website check out www.minyanville.com It's a great resource for everyone from beginning investors to advanced traders.