Gap between bid/ask
>>The ask price is about 15% higher than the bid price. Knowng only this we would expect the price to go down, yes?
First of all, you need to know where the "bid" and the "ask" come from. The NYSE and AMEX are auction markets - the bid and the ask come directly from stock holders or would-be buyers. There is a "specialist" (a floor trader) who physically matches buyers to sellers in order for a transaction to complete.
On the NASDAQ, OTCBB and Pinksheets, the markets are negotiated markets. Instead of trading directly from buyer to seller, you buy and sell to a "dealer" called the market maker. Like a used car dealer, the market maker establishes a difference between the buy price (bid) and the sell price (ask). There can be, and usually are, more than one market maker dealing in a particular security. They each set their own bid and ask. What you as the consumer see is the highest bid and the lowest ask from the market makers. Since you are asking about the meaning of a weekend bid and ask, you are probably talking about a NASDAQ, OTCBB or Pinksheet stock.
The bid and ask that you see over the weekend is typically meaningless. For example, if you look right now (Sunday night) at IVAN (Nasdaq) you will see a bid of $0.01 and an ask of $9000. (Last trade was $2.23). One of the market makers has left his system up, but has set the bid and ask to meaningless numbers. If you were to look at EDNE.OB, on the other hand, the last trade was $6.91, with a bid of $6.89 and an ask of $6.91 still showing. These probably represent the last B/A of the previous trading day, or sometimes they represent electronic trading for up to an hour after the market close (the Electronic Communication Network or ECN referred to by previous poster). These are typical institutional trades or trades between market makers, and are poor representations of the actual market demand for the security.
At any rate, these numbers will all be reset prior to the new trading day depending upon the pre-market orders waiting to be filled. Generally the ECN opens an hour before the normal market, during which time the market makers all get their acts together and set their individual bid/ask numbers for the coming session. If there is activity during the pre-market you will probably see an updated bid/ask on your quotation service. If not, you will not see an update until the session opens. At any rate, the pre-market bid/ask is a poor indication of what will happen upon the market open.
It is possible to see a wide bid/ask spread even during the trading session for securities handled by a market maker. If the security is thinly traded, and if it is handled by few market makers, you will often see a huge spread (sometimes even double) between bid and ask. The market makers are buying and selling from you out of their inventory. They do not want to be stuck with large amounts of non-liquid shares, so they offer very little to a seller. They are not making many transactions, and want a profit for dealing with the stock, so they charge a lot to the buyer. In more heavily traded securities with several market makers the bid/ask tend to be a lot closer, sinc ethe market makers make their profits from a larger volume of transactions at a narrower spread.
You can sometimes "read" what is going on by the spread between bid and ask. If a stock has a definite direction (up or down) the ask will rise, dragging the bid along with it (during an uptrend) or the bid will fall, dragging the ask along with it (during a downtrend). If the trend is weakening or reversing, you will often see the bid and ask start to separate. The market maker sees that a rising stock is peaking (less buy orders coming in) and therefore starts refusing to raise the bid, even though he is still raising the ask. He does not want to end up buying at a high price and be caught holding shares that he has to sell for less than he paid once the trend reverses. Similarly, if a stock is falling and the trend starts to reverse, the ask may stay the same, even though the bid contines to drop. The market maker does not want to sell shares at a low price that he may have to replace at a higher price.
Lengthy explanation
, but you should now be able to answer your own questions. (1) can we predict the market direction by the bid/ask spread when the markets are closed? Answer: No. The data will all change before the next market open. (2) Do the numbers represent the last trade, or current status of orders? Answer: Neither. Some of the market makers are not reporting, so you are not getting a representative bid/ask. You can see anything from the ridiculous (the IVAN example) to data that represents the last session transaction or ECM transaction (the EDNE example). The numbers will be updated before the session open, though, so the info that you are seeing is obsolete. (3) Is it possible to receive updated information prior to the session open? Answer: Sort of, but only if the stock trades over the ECM on the pre-market (up to an hour before the session opens). However, even this data does not give you a good prediction of what will happen when the session opens.
