Okay, I work with a couple of spaniards, and although we try never to trust them, I will this once because it's amusing.
As it has been explained to me, that is a BIG party, and they are all likely looking at the Town Hall building waiting for the signal to the start of the party which includes the running of the bulls. The signal is the third rocket to go off, like big fireworks. The reason they have the red hankerchiefs is because the traditional outfit of the region is white with a red hankerchief. It's kinda like us all dressing up like cowboys for a rodeo...although not exactly. Anyway, Juan explains that the red hankerchief is to stop the bleeding when you get gored, but more often it's used to clean up puke

I questioned whether "red" was the best color to be wearing when running from bulls, he had no response...
On another note, the spanish newspapers have a name for America/Foreigners that come to Spain to run with the bulls. It's "Bull Beacons". Ouch.
dynamo