When trading screens stop operating during weekends or official holidays, we might think that everything has come to a halt, and that the markets have entered a deep hibernation. However, the truth is that while the markets close their doors, economic activity and global events never stop.

Let’s explore what happens behind the scenes, and why we sometimes witness sudden jumps or declines in stock prices as soon as the opening bell rings.

The "Dam" Effect: Accumulation of News and Events

Imagine the stock market as a flowing river, and the holiday as a temporary "dam" that halts this flow. During the closure period, the world does not stop producing news; major political decisions may be made, oil prices may change, companies may announce their earnings, or significant global economic data may be released.

All this information and events accumulate behind the "holiday dam". Once the market opens its doors on the first business day, the dam gates open, allowing all this news to flow at once, which immediately and strongly reflects on price movements.

The "Price Gap" Phenomenon (Sudden Jumps)

Due to this news accumulation we mentioned, a stock often opens at a price that is completely different from the price at which it closed before the holiday.

For example, if a company's stock closed at 100 riyals, and positive stimulating news emerged during the holiday, the stock may open the next day at 103 riyals directly, bypassing the prices in between (101 and 102). This phenomenon is financially known as a "price gap" (Gaps), reflecting the rapid change in the beliefs of buyers and sellers based on developments that occurred during the closure.

Scientific Explanation: Markets are "Smart" and Quick to Respond

In economics, there is a famous theory awarded the Nobel Prize known as the "Efficient Market Hypothesis" developed by Nobel laureate Eugene Fama. This theory simplifies the matter and states that financial markets are very "smart" and capable of absorbing all available information and pricing it at the same moment.

Therefore, when the market opens after the holiday, prices do not take long hours to react to the accumulated news; rather, they "digest" it and adjust their values in the first seconds and minutes of trading to reflect the new reality of companies and the economy.

The Connection of the Saudi Market (TASI) to the World and Oil Prices

It is very important to remember that our financial market is not isolated from the world. While we are on a weekly holiday (Friday and Saturday), major global markets (such as the U.S. market) continue to operate on Friday.

More importantly for our economy, commodity markets, led by "oil", continue to trade. Given that many of our leading companies are linked to global energy markets, any sharp change in oil prices or strong fluctuations in global markets during our holiday will have a direct and clear impact on our trading screens on Sunday morning.

Thus, the holiday is not a "pause" period for the stock, but rather a silent period during which events and news are reassessed. A conscious investor does not get swept away by violent fluctuations in the first moments of the opening, but always focuses on the bigger picture and the long term, remembering that successful investment is built on solid foundations of companies, not on the momentary reactions of the markets.