Stock Market Volatility And Trading Volumes Indicate Investors Are Still Trading

Tuesday saw Wall Street enjoying its second-best advance ever, but Wednesday presented a mixed bag of major stock indexes. While many have been referring to the stock market at seesawing, at times the drastic losses and gains are more like a bungee jump – and just as gut-wrenching for investors. So what are investors to make of the ongoing extreme volatility of the market? There are varying opinions among experts, but if looking for the proverbial light at the end of the tunnel, investors may want to bear in mind that this is not the first time that the market has been extremely volatile and, based on historic trends, a number of analysts believe that more stable times are not too far ahead.

Historically, the only time period that was more volatile than what is currently being experienced was during, and following, the stock market crash of 1929. But some experts are of the opinion that volatility should be seen as a good thing, as it indicates that there is plenty of trading activity going on and investors have not written off the stock market as a bad investment option. This is confirmed by the fact that the New York Stock Exchange volumes increased substantially in September and October. Many believe that the volatility could very well be marking the end of a bear market. How long this period will last and whether the market has bottomed out is impossible to predict, but a bullish market may be on the horizon.

Investors, traders, analysts and others who make a living from the stock market watch the charts in an effort to identify major trends in the market. Knowing when a new trend is becoming established, as well as when it is nearing the end of its run, is valuable information. While the current extreme volatility makes identifying a trend well nigh impossible, historically periods of high volatility have marked major changes in market trends, such as in 1974, 1982, 2000 and 2002.

Statistically, the Dow Jones industrial average has experienced both its two biggest point gains, and its two biggest point losses, during the month of October. The intraday low of the current bear market occurred on 10 October when the market took a nose dive soon after opening, only to recover later in the day. Since then the market has been experiencing wild swings, but has actually been moving sideways. However, even when the market starts stabilizing, given all the changes that have happened, and are continuing to happen, in the financial sector, the U.S. stock market of the future will no doubt be a lot different from what it was even a year ago.