As June wraps up another market quarter, we hope you're off enjoying the summer and looking forward to the festive long weekend coming up.  A more detailed overview of the market activity throughout the 2nd quarter will be available within a few weeks in our quarterly newsletter Vantage Point. In the meantime, the tragedy in the Gulf is ruling the news headlines, distracting attention of the non-financial media from continuing market volatility.

It is safe to say that a cyclical (short-term) bull market commenced in March 2009.  Bull markets are formed when all pullbacks inside the bull are contained at a higher price than the previous pullback.  We saw pullbacks during the summer and fall of 2009, and on February 5, 2010 when the S&P 500 Index was at a low price of 1045. Most recently on June 7th, the S&P 500 Index tested this level successfully, meaning that buyers bid-up the price of underlying securities.  As support held, a sharp rally of just over 8% ensued from which the S&P 500 Index regained trading above the 200 day moving average.  Stadion's Investment Model indications halted their negative descent and started to make progress toward a positive market reading.  
 
Stadion's Investment Model was very close to indentifying a new positive trend by mid-month.  After a Monday morning gap-up on June 21st following positive news that China would let their currency float against the dollar, the S&P 500 Index was in reach of reclaiming its 50 day moving average.  As we have mentioned in previous updates, volatility cuts both directions. What transpired from the June 21st morning gap-up was a brutal sell-off trapping investors who bought hoping that the 200 day moving average would act as support. 
 
On June 29th, the equity markets were again rocked by large declines.  Selling pressure dominated so thoroughly that only 1 out of the 500 S&P 500 Index stocks managed a positive close.  Most importantly, the S&P 500 Index closed at a level lower than the lowest point it traded during the February 2010 pullback putting the cyclical bull market in jeopardy. Should fear escalate and selling intensify, we are well insulated against adverse volatility. We believe our Stadion investors can comfortably concentrate on the fireworks fun in the sky this 4th of July rather than any potential fireworks in the financial markets.  Throughout the month, the tactical components of Stadion investors' portfolios were-and are-shielded from undue risk.