The last couple of days have made it abundantly clear, volatility is still the name of the game in the stock market right now. Consecutive days of a loss of 335 points and then a gain of 279 points on the Dow used to be a very rare occurrence but now it is simply become the norm.

What exact does this volatility in the stock market tell us about the current state of the economy and the confidence of investors? It tells us that investors are very uncertain about what is next for the economy and at this point they are unable to make any stable hypothesis as to when things will get better. Rather than a stable market that tries to find its footing we have a market that is full of uncertainty and is as fickle as any market in decades. One day investors may be encouraged that things may not be quite as bad as they feared, while the next it feels as if the sky is falling.

What should the average investor do in this kind of environment? The key is to not read too much into daily movements of the market. The wild swings up and down are likely to continue, but until the volatility begins to level off it will be very difficult for the individual to make money in the stock market. It is fair to say that in a period with so much uncertainty and so much volatility there is a much greater risk to the average investor than there is reward.

This doesn’t mean you can’t invest in anything or you shouldn’t be doing your homework on companies you might invest in sometime down the road. It is always a good idea to be ready for the time when it comes, but also realize that turning the calendar into January has done nothing to change the sentiment of the market. Tread with extreme caution during these volatile days.