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Extreme volatility is what makes amusement park thrill rides fun, but it isn’t very much fun for investors.

Sales of antacids probably spiked over the last month as investors took shots in rapid order while they watched almost-daily triple-digit swings on the Dow Jones industrial average. In the last week alone, the market recorded two of its largest single-day point changes on record. On Wednesday, the Dow dropped 733 points, its second-largest one-day point loss ever. The drop wiped out most of the Dow’s historic 936-point gain on Monday.

On Thursday, the Dow finished up 401 points, which seems relatively mild compared with the previous days’ gyrations. But within that day’s trading period, the index changed directions 75 times. The rapid movement of the market was reflected in the Chicago Board Options Exchange volatility index, known as the VIX, which on Thursday rose to an all-time intraday high of 81.17, its first-ever move over 80. The VIX, which usually trades below 50, tracks options activity for the companies that make up the S&P 500.

"I’m getting a little dizzy here," Concord investment adviser Jim Weiss said after Thursday’s close. "There have been savage emotions in the market."

For much of the last month, the markets have been driven by fear: first, fear the United States had no plan to rescue the banks, and then, after the decision to invest $250 billion in U.S. banks, fear that the cash injection wouldn’t be enough to get credit flowing again. The biggest fear is that the financial crisis could mean a prolonged recession with heavy job losses.

"Restoring order to the credit market is crucial, because credit is the fuel that feeds our economic engine," said economist Donald Klepper-Smith, research director at DataCore Partners in New Haven, Conn., and Martha’s Vineyard. "The crisis in the financial markets is really a crisis of confidence — business confidence, consumer confidence, and investor confidence."

There have been some signs that investors are trying to check their emotions and refocus on economic data.

"We’re getting a lot of data, and the market is trying to sort it out," said Weiss, who is president of the money management firm Weiss Capital Management. "The level of confusion, uncertainty, and panic is close to unprecedented. The market’s time horizon, which normally looks six to nine months out, has been reduced to about 36 hours."

Cornelius Hurley, director of Boston University’s Morin Center for Banking and Financial Law, said volatility in the market has been a natural reaction to the uncertainties in the economic landscape.

The cash infusion into banks is only the first step in what Hurley called a painful "de-leveraging," a process of repricing hundreds of billions of dollars in overinflated assets, from tract houses to bank portfolios, to their new value. The jitters likely will continue until it is complete, said Hurley, a former assistant general counsel to the Federal Reserve Board of Governors.

In a keynote address to Harvard Business School’s Centennial Global Business Summit last week, Lawrence H. Summers, former U.S, Treasury secretary and Harvard University president, described "a vortex of five vicious cycles" threatening the economy, some of which already are being seen.

One trend that already has occurred is falling stock prices, which prompt investors to sell stock, pushing prices even lower cash advance loan no fax. Another is bank portfolios losing value, leaving banks with less capital to lend and causing them to lose more value. Still another is slowing economic activity weakens the financial system, constricting lending and further weakening the economy.

Most alarming is the prospect for a "Keynesian" cycle, named for the British economist John Maynard Keynes, in which less spending leads to job losses, leading in turn to lower incomes and still less spending; and a potential "panic" cycle, in which depositors rush to withdraw money from troubled banks, putting them in more trouble and causing more withdrawals.

"These five vicious cycles have created a situation unlike anything most of us have ever seen," Summers said.

Some of the dynamics Summers cited showed up in the deepest point drops of the last few weeks, particularly when hedge funds unloaded large volumes of stock in response to "redemption notices" from nervous investors. In some cases, automated computer programs generated those transactions.

This "forced selling" is a new factor in the market, but one that may persist until capital flows have resumed and the housing market has bottomed out, warned James T. Swanson, chief investment strategist for Boston mutual funds company MFS Investment Management. "The market won’t know how to behave until you see some stability in housing, because that’s the root of the problem."

Many analysts expect the stock market’s ups and downs will continue.

"We’re going to continue to see volatility. You’re not going to see 50-point ranges, you’re going to see two-three-four hundred point ranges," said Woody Dorsey, president of Market Semiotics, a financial forecasting firm in Castleton, Vt.

Jim Ferrare, senior portfolio manager at Pinnacle Associates in Red Bank, N.J., said the changes that will result from government actions around the world to revive the credit markets will take some time to emerge, letting uncertainty linger on Wall Street.

"Volatility is here for a while, but more importantly, the change is not an overnight change," he said, referring to the government’s steps to restore normal levels of lending.

Financial advisers say such volatility is testing investors’ ability to, if not stand pat, avoid making rash moves — not just out of the market, but back in again, as well.

TrimTabs Investment Research reports that as of mid-October, investors had withdrawn $55.6 billion from equity funds. That compares with the $94.48 billion added in all of 2007.

Investment advisers say that while the stock market may seem like a maelstrom of uncertainty right now, investors who have proper plans can take advantage of the situation.

"This is a horrific market. But if you’ve already made a mistake, don’t sit on the sidelines and compound the mistake," said Dan Yu, a certified financial planner at Eisner LLP’s Personal Wealth Advisors group.

Yu and many other financial planners stress that long-term investors should do all they can to avoid making panic decisions and that those who do get out should return to the market incrementally. Putting money back into the market in chunks, rather than all at once, can help investors avoid that sick feeling of seeing the market fall sharply the day after they reinvest.

Ron Florance, director of asset allocation and strategy for Wells Fargo Private Bank, said investors too often fail to think about their long-term goals and let opportunity pass them by.

"Allowing the hysteria to drive your investment strategy is just a disaster in the making," he said. "Right now, changing your strategy is not a good idea."

THE ASSOCIATED PRESS CONTRIBUTED

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