Reading the Dow's Tea Leaves

Pity the poor markets reporter. In today's volatile environment, covering the wild swings in the Dow can challenge even the best-sourced stocks scribblers.

Every now and then, there is a conundrum, an anomaly, or an inexplicable phenomenon that moves markets. And yesterday was such a day. After a topsy-turvy trading day, the Dow surged more than 200 points during the last thirty minutes, before ending the day up 150, or 1.1 percent.

A similar, though smaller, surge occurred today.

There was no obvious reason for either spike. But editors often demand that reporters meet a quota of quotes in their stories, and thankfully there is a boatload of pontificators on speed dial, willing to offer an explanation.

"It's a matter of investors regaining their emotional stability," after a steep selloff last week, strategist Al Goldman, of A.G. Edwards & Sons, told the Wall Street Journal. "The fundamentals are still positive, but folks are all shook up."

The New York Times reported that analysts speculated that automatic computer-generated trades might have played a role in the rally late yesterday. "What the technicals taketh away, they can give back," said Sam Stovall, chief investment strategist with Standard & Poor's.

"That was a power short-covering, end-of-the-day, first-of-the-month rally," Jack Bouroudjian, a principal with Brewer Investment Group, told Reuters.

"At some point people finally decided unless everything in the world suddenly goes bad here, this is a good time to get in," Ernie Ankrim, of the Russell Investment Group told Bloomberg.

"Selling pressure abated late in the day," explained Art Hogan, chief market strategist at Jefferies & Co., to CNN Money, adding that it was largely based on "fear of missing the bottom in an oversold market."

Perhaps Cleveland Rueckert, an analyst from Birinyi Associates, said it best when he spoke to Forbes.com: "I think you just can't really explain all the moves that happen when there's increased volatility like that."

And there you have it.

by Megan Barnett