Last Week's S&P500 Performance

We seem to be in a period of weeks of indeterminate financial markets behavior.

For the evolving month of February, the S&P is down, with roughly a -2.2% return. That's including last week's +1.4% return, and the prior week's -4.6% return.

Looking at my newly-devised monthly standard deviation measure of daily S&P500 Index returns, it's hard to get excited about last week's return. That is because it falls within the confidence interval of 68% that such a return could occur, plus or minus, in one day for the S&P.

The daily returns last week were: +0.59%, +0.73%, +1.36%, -1.34%, and +0.08%.

Tuesday's rise was attributed to Warren Buffett's self-serving offer to reinsure municipal instruments. Wednesday's gain was allegedly due to positive corporate earnings reports and some positive sales data. This, by the way, amidst what more pundits, and a few economists, including former Fed chairman Greenspan have decided is, or is about to be a recession.

Thursday's large drop occurred as Treasury Secretary Paulson, Fed Chairman Bernanke and SEC Chairman Cox all testified before Congress. Given the typically-hostile attitude of the Democratic-chaired committee to the Republican administration officials, it's not all that surprising that the subsequent testimony roiled markets.

Some felt that Bernanke left the door open to a further rate cut of 1/4% point at the next Fed meeting.

Finally, on Friday, despite poor manufacturing data and a low Michigan Index of Consumer Confidence, as well as reported investor concerns about inflation, the index managed a small gain.

Confused about investors' reactions to various 'news' items? You're not alone. At least I'm with you.

So, as we head into the last half of this month, the S&P is so volatile that there is a good chance it will either slice most of the negative return, or add another -1.4% to it, on any given day. In any two day period, the index could turn positive, or more than double its negative return for the month.

After reviewing this past week's sample of putative causes and effects on the index's daily performance, it gives one pause to have any sense of which way it will finish this month.

It's so tentative that my partner and I are actually watching daily S&P performances, in order to keep up with the latest moves in this very unstable market. Until one of the major indicators which we monitor either confirms its current position, or moves significantly in another direction, we are unlikely to take any new positions in equities or options.

It's simply too difficult to discern a longer-term market direction for the next few months at this time.