Dow gains 800 points in less than one hour...

[MacCruiskeen]

....after having lost that amount in the course of the day:

MARKET DATA - 20:52 UK

FTSE 100 3932.06 down -381.74 -8.85%

Dow Jones 8773.37 up 194.18 2.26%

Nasdaq 1674.62 up 29.50 1.79%

http://news.bbc.co.uk/

WTF? What motivated that sudden 'surge'?

[nathan28]

All it means is that the Dow gained 800 points in an hour.

Nasdaq (i.e., tech) was barely in the green. Small cap stocks were up overall, however.

Institutional and black box buying always kicks in at 3PM.

If you were watching the charts, there were massive, massive wobbles after the initial hail mary, and it still closed down in the red. that says to me that a short-term bottom might be in. Maybe. I'd be sure enough to gamble if there had been a greenprint, but as it stands, who knows. it's a long weekend for banks though not markets so who knows.

[JackRiddler]

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Poster on DU suggested look at the gold price, so I did.

Gold charts here...

http://www.usagold.com/gold-price.html

Look at the top two, for this week and today:

Gold oz. having gained from $840 to $920 all this week lost the entire gain this afternoon starting around 1 pm Friday and is back down to $840.

The biggest plunge in gold started about an hour before the sudden rally of 800 pts. in the DOW, which would support the idea that central banks sold off gold and pumped money into the market to blunt the market plunge on a Friday (which is the day they always want to see end on a high). Also, the DOW surge came soon after it touched 8000, which suggests a plunge protection plan kicked in there.

Is that what happened? Let me call Bernanke and ask...

So you know, if the world just called a timeout and we collectively wrote rules for a new civilization, it might work out okay. Unfortunately...

[barracuda]

The other theory on the gold price fall that I have heard is sales to satisfy margin calls stemming from some of the raucous Thursday action.

[Nordic]

They were selling gold like crazy to get cash. Berlusconi saying they might close the markets to trading, I believe, had the affect of making people want to get as much cash as they could before the weekend.

I think the 800 point rally came after Paulson announced they were gonna nationalize the banks.

Then againk, I prayed for rain the other day and it rained, so .....

Who really knows anything? Except that, until the dollar crashes, cash is king.

[mentalgongfu2]

can anyone comment intelligently on the relation between the financial crisis, bailout plan, stock market and the price of gas?

I don't yet understand the crux of what is happening in the financial sector, despite what I've learned here, but the price of gas in Clinton, Iowa was $2.69 today. It's not that long ago that it was $3.69, and not too much longer that it was $1.69. I'm young, I know, but I've never seen price fluctuations in gasoline this big. What does the drop mean and how does it relate to the general trends of the 'economy?'

[nathan28]

from a bearish trading board:

Whatever happened to free markets? The PigMen took a good thing way too far -- and now it's over. Get used to it.

That's the correct response to the Washington Post article I cited earlier today, the one that ran under the headline: The End Of American Capitalism? New York is finished as the financial capital of the world -- washed up, terminated, kaput. The PigMen made monkeys out of all the [sovereign wealth funds], and no one in Europe, Asia or the Middle East is going to forget it for a very long time. Wall Street's franchise will be carved up between Dubai, Shanghai, and the Russians. Why? Because they have the cash reserves, and we don't. End of story.

If you own real estate in Manhattan, sell it now. It will get steadily cheaper for the next one thousand years.

Lastly -- irrespective of whether "peak oil" is a fact or a fantasy -- oil will not get meaningfully cheaper in real terms until someone comes up with a substitute fuel and the world spends the trillions necessary for the requisite technology change-out. We are talking decades. If you're thinking about "demand destruction" or trying to make a forecast based on a chart -- just fuggedaboutit. Oil has only traded freely on open markets for a few decades. For a hundred years prior to the creation of the oil futures market on Nymex, the price of oil was determined by "interested parties" in a back room. This is the way it will be from now on. Oil has turned out to be the greatest vehicle for the transfer of wealth in the history of planet. The oil producers understand this, and they will do whatever they have to keep the wealth flowing in their direction. Yes, they screwed up on this previously, but they have learned from their mistakes and the market is much tighter and more narrowly based now. If you want to short oil, go ahead, but bear in mind that Ali Naimi may be on the other side of the trade -- and if he is, you're toast.

i'll try to comment later, i have to patronize my "local" dairy-farm/abattoir

[JackRiddler]

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I'm not a finance economist or a geologist, and I don't know what the "true" dollar price of oil "should" be right now, but I don't think the fluctuations in oil price are a big mystery. At least, if you take a big picture view that doesn't help if you're wondering how to invest money at any given moment.

First, this is a highly tradeable, indispensable commodity required by all markets everywhere. In a world where trillions in extra capital washes around every day looking for any immediate return (such as through arbitage) all fluctuations are magnified by speculative panic and euphoria. Every spike is exaggerated because volatility is what makes opportunities for the big gamblers (usually more than anything else in any given short-term period). A temporary perception of under or over supply of just one percent, for example, might translate to ten or twenty times that in percent movement of oil price. That's how the gambling natures of the traders prefer it to be.

Gas is a secondary market with fewer players, where fluctuations in movements in crude can be reflected instantly or weeks and months later, depending on where sellers see their interest because they can engage in hoarding.

The most direct cause of crude oil price fluctuation is the dollar, because oil is priced in dollars so that the long dollar fall caused oil to rise and the current dollar surge (due to a flight to T-bills and the continuing perception of the US as a haven) pushes oil prices down.

Otherwise, the driver in the speculation at any given time is the narrative that the big players most accept, which flashes around the world instantaneously as they all, so to speak, watch the same TV.

The narratives as oil went up included the dollar fall, potential instability in supply (Iraq, Nigeria, etc.), apparent alliances among key suppliers against Bush-America (Russia, Venezuela, Iran), rising demand from the new economic powers (China, India), anticipation of supply bottlenecks as capacity on currently operating fields peaks, and anticipation of peak oil historically if discoveries and energy return as well as EROEI from new field enclosures cannot keep up with consumption in the middle term.

The story drivers as oil comes down again are the rise for now in the dollar and anticipation due to the crisis of a world depression that will cut demand across the board. This should prompt the supplier nations to collaborate in reducing supply to stabilize the price, and may also act to slow down investment in new fields.

But what really comes next, and when? How the hell should I know?

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