Yesterday's S&P Gains

7.1%! More than 54 points!

That's how much the S&P500 Index rose yesterday, allegedly in response to the Treasury's newly-unveiled TALF plan.

The knee-jerk interpretation has been that equity investors are all better now, just based on the terms of the new plan.

How else to interpret such an impressive and surely near-record S&P single-day gain?

Well, one way is to not interpret it at all, since it's just another one-day S&P performance. Since mid-February of 2008, here are the 10 best and worst single-day percentage performances of the S&P.

10/13/2008	0.116
10/28/2008	0.108
3/23/2009	0.071
11/13/2008	0.069
11/24/2008	0.065
3/10/2009	0.064
11/21/2008	0.063
9/30/2008	0.053
12/16/2008	0.051
10/20/2008	0.048

The total return of these 10 best days is +70.7%

Worst 10 days since February of 2008-

11/5/2008	-0.053
1/20/2009	-0.053
10/7/2008	-0.057
10/22/2008	-0.061
11/19/2008	-0.061
11/20/2008	-0.067
10/9/2008	-0.076
9/29/2008	-0.088
12/1/2008	-0.089
10/15/2008	-0.090

Total return for these 10 worst days is -69.6%

The total S&P500 return for the days included since last February is -39.4%.

Rather like my findings in this post from September of 2997, you can see that quite a bit of recent S&P return could be accounted for in these 20 days. I wouldn't be surprised if that post receives a lot of hits today.

My point is that there are plenty of examples, even in just the last 13 months, of similarly-extreme daily S&P percentage returns, either positive or negative. Yesterday's was only the third-best daily S&P500 return of the past thirteen months. The two best were both in excess of +10%. And the totals of the 10 best and 10 worst return days for the period were nearly identical.

Why would yesterday represent the end of a bear market and the start of a new bull market, whereas the two higher daily S&P return days in October of last year did not?

Our proprietary volatility measure went up- a lot- yesterday. It's now firmly above 3% for the first time this year.

Granted, the S&P rise since early March has resulted in the month's having roughly an 11% return thus far. But even that does not move our equity-market re-entry signal to anything remotely near indicating a switch from short to long allocations.

The past twelve months of S&P returns have, in total, been so massively negative, in such a dismal pattern, that it would take a lot more than just a good March, in our opinion, to indicate that equities are now poised for a monotonic upward move.

Consider my post yesterday. The Treasury plan for toxic assets has no impact on real economic issues such as consumer credit. Or corporate earnings, for that matter.

While many people are understandably happy about the S&P's dramatic gains yesterday, I don't see it as particularly noteworthy at this time.

Quite a few other performance measures would have to look different than they do now before we will buy calls, instead of puts, and see a long, rather than a short equity allocation.