THE DOW'S MILD, WILD RIDE

By Daniel Kadlec

If you blew town Aug. 15 for a one-week remote-island getaway, you could have concluded upon returning that you hadn't missed a thing on Wall Street. The Dow Jones industrial average was at 7942 when you departed; 7894 when you reappeared, a pimple of a drop. But you would have been wrong--and missed the perverse pleasure of watching hordes of young traders sweating through their custom-made threads while the market extended and retracted like a bungee jumper flung off the George Washington Bridge.

The Dow rose or fell at least 100 points all five days that week, part of a numbing month-long stretch in which wild price swings have found space on the front page of many business sections. It was more of the same last week. The Dow plunged 133 points Wednesday and was down about that much again Thursday before roaring back 80 points late in the day, and then swinging another 100 plus points on Friday. In absolute terms, there's never been anything like this flurry of 100- and 200-point moves. Even in percentage terms--the thing that matters--the market hasn't been quite like this since Saddam Hussein invaded Kuwait.

Wall Street's gurus are, of course, on the case. What can the price swings mean? Surprisingly, a crowd that has no trouble gleaning significance every time Alan Greenspan sniffles is coming up short on the price-volatility question. (Maybe they'll blame El Nino.) Some suspect that rising volatility signals a market about to run out of gas, but then they run out of evidence. Others conclude that this is a random event with no meaning.

One thing the gurus do know is that the recent market swings, while unnerving, aren't as historic as they first appear. It's just that the past five years have been an unusually placid period, making the recent action striking by contrast. Daily Dow moves of 1% or 2%, such as we've seen lately, had been sparse since 1991. But before that they were routine. The Chicago-based research firm Logical Information Machines calculates that since 1945 the Dow has risen or fallen at least 1% in a day 2,268 times, or an average of 44 times a year. It's happened 50 times this year. The news is that this is the way the stock market really behaves, which is a reason many people stayed out of stocks.

Today's market swings have a different flavor in one respect, though. Lately they have been coming rapid-fire, which may lead to yet another conclusion. The Dow rose or fell at least 1% on seven of 10 consecutive trading days at the end of August. Such strings of volatile trading days have been rare, occurring roughly 20 times since 1950, says Alan Shaw, chief technical analyst at Smith Barney. The clusters have overwhelmingly been closer to the start than the end of long rallies. "It's a wives' tale that this volatility is a precursor of some negative move," Shaw says. A streak of volatile prices last occurred late in 1990, which was the start of the current bull market. Clusters also occurred near the start of bull markets in '82, '74, '70, '66, '62 and '50. Clusters occurred near market tops in '80 and '73. And the '87 crash? Gotcha coming and going: one cluster directly preceded it, while another occurred around the post-crash lows.

What does it mean this time? Could it be the end of the bull market? Nobody knows. But herky-jerky trading patterns alone are no reason to run. Sit back and pretend that you're on that island blissfully out of touch with your broker.

Daniel Kadlec is TIME's Wall Street columnist. Reach him at kadlec@time.com