What does it mean when financial news reports say that more issues were sold than bought?

By Chad Langager AAA
A:

This simply means that in a market, more stocks (issues) traded down for the day compared to the number of companies that traded up for the day.

When a stock or issue is considered to be bought it must be trading up for the day or higher than it started the day; the idea being that more people want to buy than sell the stock so they bid the price up. Conversely, if there are more investors wanting to sell than buy a stock, the price will be bid down. It is this idea that allows a stock to be considered bought or sold even though for every transaction there is of course a buyer and a seller.

The measures behind this statement are referred to as advances (up), declines (down), and unchanged. This is a comparative measure that gives investors a deeper understanding of the market's movements. Each of the measures will be compared to each other. For example, if there are 100 stocks in the market with 40 advances, 50 declines and 10 unchanged, the market as a whole is considered to be sold as there are more declines than advances. Financial news reports often use these expressions to describe the day's movements of a particular market, usually the world's largest, based on capitalization, the NYSE.

The advances and declines help give the investor a more in-depth view of the market. For example, say the NYSE Composite Index fell 1.5% with 52% advances, 38% declines and 10% unchanged. This should catch an investor's eye as the NYSE Composite Index itself fell but more issues were bought than sold. If the investor were to limit their focus to just the movement of the exchange and not at the movements of the underlying components they would miss the underlying strength of the exchange. But how can the market have more issues bought yet end the day down 1.5%? This is likely due to specific companies or sectors being extremely sold while the rest of the market is trading up or flat. For instance, say there are a lot of oil companies on an exchange and oil fell $20 during the day. All of these companies would suffer huge losses while other companies would not be affected or see a potential gain due to the lower cost of oil. The market could close down if the loss from oil companies outweighed the gains in the other companies.

(For more on understanding the market, see our Market Strength Tutorial. For more on current advances and declines at several exchanges, go to the bottom of the Investopedia Research page.)

RELATED FAQS

  1. How does the risk of investing in the electronics sector compare to the broader market?

    Learn how the electronics sector's risk compares to the broader market; discover real-world examples of how high exposure ...
  2. How do markets account for systematic risk?

    Find out how market participants deal with systematic risk, or the kind of market risk that cannot be diversified away through ...
  3. What stage of the economic cycle is usually the best for an investor to enter the ...

    Learn how savvy investors employ sector rotation to gain from the electronics sector during expansion and avoid losses during ...
  4. How do S&P 500 futures work?

    Learn about the mechanics of S&P 500 futures contracts, a type of stock index future introduced by the Chicago Mercantile ...
RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Einhorn Effect

    The sharp drop in a publicly traded company’s share price that ...
  3. Institutional Ownership

    The amount of a company’s available stock owned by mutual or ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  5. Acquisition

    A corporate action in which a company buys most, if not all, ...
  6. International Finance Corporation

    The International Finance Corporation is an organization dedicated ...

You May Also Like

Related Articles
  1. Stock Analysis

    The World's Top Ten News Companies

  2. Forex

    What Is Online Trading Academy?

  3. Investing Basics

    Why did Berkshire Hathaway create Class ...

  4. Stock Analysis

    Buyinb Facebook Stock, A Beginner's ...

  5. Investing News

    Alibaba's Top Competitors

Trading Center