After stocks rallied into the close last Thursday with big gains, as bargain hunters stepped in following initial losses on data releases showing drops in factory output. The Dow Jones Industrial Average climbed 401 points; the S&P 500 added 38 points and the Nasdaq Composite rose 89 points.

Extending to trade higher on Friday but stocks dip into negative territory erasing all its gains as investors take profit in the late trading session ahead of the close, with the major indexes ending with daily losses but up for the week, capping a volatile streak involving wild swings in either direction amid signs of a possible thaw in the credit markets.

The Dow Jones Industrial Average lost 127.04 points, or 1.4%, to end at 8,852.22, with a weekly gain of 4.75%, and marking its first up after four week of downtrend. The S&P 500 Index fell 5.87 points, or 0.6%, to 940.56, up 4.6% for the week. The Nasdaq Composite Index shed 6.42 points, or 0.4%, to 1,711.29, up 3.7% from last Friday’s close.

The Dow Industrials has shown some significant moves each day over the past two weeks with swings of about 10% from its session low to session high.

On Thursday, the CBOE Volatility Index spiked to a record high in unprecedented territory, crossing 80 for the first time intraday to end the week at about 70.

History, however might give some clues as to when the volatility will settle down. The chart shows how the VIX trends over time after spiking. The higher the VIX, the quicker it falls back but at the levels now, it may still be here for awhile.

The Dow is down over 37% from its market peak on October 9, 2007 of 14,164.53.

The S&P is down almost 39% from its peak of 1565.15 on October 9, 2007.

The NASDAQ is down almost 39% from its peak of 2859.12 hit on October 31, 2007.

High volatility should be expected in the coming weeks, whipsawing the markets as efforts to rescue the embattled financial system in the face of global recession is the main concern.

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours” - Harry S Truman, in Observer, April 13, 1958. 33rd president of US (1884 - 1972)

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