Whither The Equity Markets- Again?

How to interpret the recent roller coaster ride that has been the S&P500 Index?

Yesterday, the index rose over 40 points, to 1080.29. Yet, only four sessions earlier, the S&P closed at 1047.22. Back on June 30, the index closed just under 1031. Then up to nearly 1128 on August 9th.

By our proprietary volatility measure, the index regained in just yesterday all the volatility it had managed to shed since August 12th.

To me, the very fact that volatility has been, well, so volatile, suggests a lack of sufficient confidence in equities at present to underpin belief in a long, steady rise in values.

Plus, if you have followed the various apparent reasons for the equity index's recent lurchings between highs and lows, you, like I, know that the reasons for the declines, i.e., global economic weakness and lingering high US unemployment, are no closer to resolution than they've been for months. By contrast, the market rises seem to be short, sharp and a product of seemingly-myopic fixation on the rise in a few isolated economic indicators.

It's tough to know just when to go short, but the market dynamics, and our signals, suggest that this is the next likely direction for equity prices.