If the stock market is driven by emotion, what does it say about the last two days..help needed here

[Peacetrain]

Someone who understands the underpinnings of the economy...could you please walk me through this as I try and understand it.

People have pulled their money out of the market and are sitting on treasuries on the sidelines. I think I have that part down.

As I understand it we are talking trillions out of the markets world wide.

With Obama announcing his economic team, is what we are seeing a break in that dam of money held back, or just a blip on the screen?

I understand the recession is still months and months from ending, but if the market is a leading indicator, do you think we have bottomed?

A little clueless in Iowa here

[Speck Tater]

1. What we are witnessing is increasing volatility.

In dynamical systems theory that is always a symptom of the onset of chaos. More than likely it means that the market has unhooked itself from reality and has turned into a free-wheeling casino betting on how optimistic or pessimistic people will be tomorrow.

My point of view is that this kind of volatility is way too risky, and even a long, sustained bear market has its occasional upturns. IMHO we are a looooong ways from the bottom yet.

[MercutioATC]

4. Exactly. People are grasping at straws.

ANY news at this point has the potential to cause large swings.

The fundamentals are still very scary.

[uppityperson]

2. I don't have an answer but this link shows fluctuations and news events

Shows 1 day at a time, but shows fluctuations in relationship to news events.

http://finance.google.com/finance?cid=983582&client=news

[Warpy]

3. I won't believe we've bottomed out until

and unless this economy is turned around to benefit working people instead of the wealthy. Right now it's upside down and that has us staring down the barrel of another depression. If we are allowed to shitcan Reaganomics and institute real reforms including a progressive income tax plus a rational minimum wage, then the economy will once again function as it once did and the markets will recover.

I called the bottom at 7000 by the time stupid is out of office. I also think we're going to crash through it before things get better.

I'm hearing a little talk about a new New Deal. What I'm not hearing yet is some common sense protectionism to keep jobs here once they are re created by demand. That also has to happen to keep any reformed economy alive.

[Lasher]

5. The biggest difference between you and the experts is that you are honest.

Nobody knows if or when we hit bottom. But we all get to guess if we want. But I like to call my guesses forecasts because it sounds better even if it means the same thing.

The market is responding to fear and greed just like it always does. Tomorrow there will be a relatively moderate decline as profit taking occurs. Then for the next week improvements will continue, prompted mostly by good news from Obama. But short term optimism cannot prevail against long term negative fundamentals, so the stock market will continue its decline once the current suckers' rally has run its course.

That's my 'ahem' forecast.

[no_hypocrisy]

6. An oldie but a goldie: Irrational Exuberance!

[longship]

7. Stock Market means *nothing* about the economy.

If you doubt this, read Michael Lewis' wonderful article The End

It's a great read about how all this happened. Lewis is a damned good writer who really knows how to lay down narrative.

Highly recommended.

:kick:

on edit: another great read, Galbraith's iconic The Great Crash, 1929

[OnceUponTimeOnTheNet]

8. Your are so right about the article The End. That was an eye opener for many.

It was all the snips and hints of what was happening, rolled into one great read.