Got a boss who's sunny one minute and stormy the next? Here's what you should do.
Try to understand what's really going on. There could be a host of reasons why your boss is moody, like 1) personal issues bearing down on his performance at work; 2) intense pressure from his own bosses to meet targets (with hardly any budget!); 3) a dwindling sense of self-confidence in his own performance or leadership.
Discover the triggers. Observe his mood patterns. Some detective work is in order here. What tensions trigger his outbursts? Where do these come from? Is it before or after meetings, deadlines for financial returns, or before an audit? Once you establish this, you would have a mood meter radar, and would know when to be around him and when to stay out of his way!
See if you are the cause of his frustrations. Be honest: Could you possibly be the cause of your boss' moodiness? (Just serving you some tough love here.) Could he be irritated by your poor performance, due to (come on, pick one) your consistent tardiness, your more-frequent-than-usual requests for leaves, time off, or special arrangements, failure to meet deadlines, not meeting your objectives? If any of these apply to you, then you know who needs to change. Clue: it's not your boss.
Get and give feedback. This is one reason to be thankful for performance assessment sessions. When your boss asks, "Are there any issues troubling you?", you could politely point out how his disagreeable or distressing behavior – yelling at people, constantly being on edge, having a bad temper or even fits of rage – affects the work atmosphere and your own performance at work. This conversation is a two-way street, so your boss may point out some defects in your own working methods and this can be really useful to help you improve.
Be a good listener. When you do get a chance to talk with your boss about this issue, listen well. Try to look into his or her valid points. Step into your boss' shoes, and like I mentioned, try to understand the sources of his frustration.
Another area where you could put your excellent listening skills to use is when your boss is upset. Unfortunately, when your boss is in the middle of an outburst, he or she is usually trying to make a point or get things done. Though he may unfortunately be critical of your work, your boss might actually have a point he wants you to act upon.