Volatile Market

When the Dow lost some 281 points last Friday to settle at the lowest close since May 1, I couldn’t imagine that it can make up all the losses in one session. Yet, it indeed happened as the index surged 286 points today, the largest one day gain in four years.

Looking at the past 13 trading days since the benchmark closed at all time high of 14,000 on July 19th, there are only three sessions when the Dow recorded less than 100 points movement, all on the upside. In fact, in two of the three sessions, the Dow added 92 points in each day, close to triple-digit change. At the same time, the CBOE Volatility Index (VIX) jumped from 15.06 to 22.60, an increase of 50% in market volatility. It’s amazing to see how investors sentiment changed so dramatically every day. Last Friday, everybody worried that the subprime crisis could spill over to other sectors and slow the economy and that led to the 281 points drop in the Dow. Today the speculation that the government will come to rescue sent the index 286 points higher (according to Bloomberg radio).

Tomorrow, with the Fed’s meeting on interest rate on agenda, the index could again swing 100+ points either way, though nobody expects any change in rate.