Ponyboy's teacher, Mr. Syme, is referring to the events that have taken place in Ponyboy's life during the semester, beginning with the Soc's stabbing and ending with both Johnny and Dally being killed, as well as Ponyboy's subsequent emotional withdrawal. Ponyboy at first reacts defensively, saying, "brother, was that ever a way to tell me he knew I was goofing up because I'd been in a lot of trouble" (Chapter 12). He thinks his teacher is assuming that he has been in trouble because he is a greaser, but it appears that in reality, Mr. Syme might have had a better understanding of how deeply the trauma had affected Ponyboy, and that he was truly concerned about his well-being. Mr. Syme would have known that Ponyboy had always been a good student, especially in his class, English, and he most likely perceived that Ponyboy's sudden disinterest and poor performance in school was the result of his shutting down emotionally after all he had been through. Because of these "circumstances", he offers Ponyboy a chance to redeem his grade by doing well on his final writing assignment, which incidentally may have had potential therapeutic value by its very nature. He even responds supportively when Ponyboy decides to take him up on the offer and calls late at night to clarify the assignment.
At the end of the story, Ponyboy's teacher, Mr. Syme, talks to him about his grades. Mr. Syme tells Pony that although Pony is failing, he has taken into consideration Pony's circumstances and is willing to raise his grade to a C if he can come up with a good semester theme. Ponyboy believes that Mr. Syme is referring to the trouble that Pony has gotten into throughout the year. Pony mistakenly believes that Mr. Syme is talking about how he ran away with Johnny and was wanted by the police. However, Mr. Syme is actually referring to the traumatic events that have negatively affected Pony's mental state. Mr. Syme realizes that Johnny's and Dally's deaths have had a negative impact on Pony's mind and is willing to give Ponyboy a second chance to pass to his class.