As the second quarter began the equity markets continued a powerful uptrend supported by positive market technicals, fundamentals and macro-economic news.  Midst abundant optimism , the markets traded even higher during April thanks to positive earnings announcements, with over 80% of companies beating estimates.  The markets ascended vigorously through mid-month when we began to see a slowed upward momentum, sideways price movement and increased volatility as headlines shifted from pleasant earnings surprises to negative events.
 
The SEC filed suit against Goldman Sachs, which caused downward pressure on the markets.  After factoring this information, the markets resumed a steady climb toward potential new highs.  Then the S&P cut ratings on Greece's debt, causing downward price pressure in the markets.  This decline was short-lived, as the Federal Reserve's announcement that rates would remain low for an extended period of time, along with comments on its view on the state of the economy, renewed market strength.
 
Following  the SEC's Goldman Sachs announcement, Stadion holdings in Financial-related ETFs breached the Stadion sell criteria and were liquidated.  Since the Stadion Investment Model continued calling for full equity exposure, these sell proceeds were reallocated to Dow Jones 30, NASDAQ 100 and Consumer Discretionary ETFs.  The Stadion portfolio holdings monitoring process then indicated an opportunity to trade-up, and we rolled our exposure out of DJIA into Small Cap Blend and Small Cap Value ETFs.
 
By committing a high percentage of risk tolerant objectives to sectors such as Retail, Consumer Discretionary, Technology, Small Cap and Mid Cap we have honed our focus on the return aspect of our balance between safety and return philosophy.  When our Investment Model calls for full equity exposure, we target those areas of the market exhibiting the best relative performance and balance of upside momentum and downside risk.  It is in times like these we seek the highest return from active management.  During April, our tactical portfolios (or tactical portion of your 401(k) portfolio) outperformed the broad market as defined by the S&P 500.  
 

On the Other Hand...

Over the last 2 weeks, negative headlines have blended with positive earnings reports in ways that raise concern. Adding to our concern is the downward change in direction of our faster-moving breadth measures (though still in positive territory) and the fact that our holdings in Retail ETFs crossed their sell criteria on the last day of the month. This is particularly noteworthy since Retail lead the rally and its abrupt change in direction suggests investors may be de-risking portfolios. Collectively, these changes may be early warning signs of market deterioration.  At Stadion we will take action if and when it is warranted. Until then we will continue to participate in this equity rally until a discernable change in market dynamics is signaled by our Investment Model.