If you check 10-year S&P 500 chart you will see that the stock market has been highly volatile (big swings up and down) over the past couple of month. We had something similar at the beginning of 2008. If you scroll the chart back you will find similarly tall price bars in 2000. Volatility is an aspect of technical analysis, however, it gives some insides of fundamentals - it tells that at the current moment, the same as in 2008 and 2000 the big institutional investors are very sensitive to political and economic news. Most of the uncertainty and volatility comes from the Europe. Whatever they do in Europe, their debt is not going to disappear magically overnight and most likely we will have such volatile trading for the time being. The financial sector is affected by that mostly. If you check C (City group), BAC (bank of America), JPM (JP Morgan) - who was lending to European countries - you will see that they are in strong decline since May 2011. We already know what could happen if such big institution will ask for another bailout. I'm not doing fundamental analysis, yet, from the technical analysis prospective I think we may see that the stock market is very uncertain which could be associated as period before crash or longer-term recession.
There are several approaches that could be used in the highly volatile market.
1. Some trader may prefer do not hold position (open trade) overnight and over week-ends, especially long week-ends. You never know (unless you have access to the inner circle) what is going happened overnight and how it may affect morning trading.
2. Some traders, especially long- and mid-term traders may consider increasing bar period of the technical indicators they use -
it will help to avoid choppy trading and will filter big swings we have now.
3. Some traders, especially short-term and intraday traders, may consider decreasing bar period setting of the technical indicators they use -
it will make indicators more sensitive and they will generate signals faster (more signals could be expected).
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