Weekly Commentary

May 11, 2010

The markets have now had a few days to digest the mayhem that ensued last week. Volatility remains high though, with the markets gapping up over 4% to open trading this week. Swings in confidence over bailouts of sovereign debt continue to weigh heavily on the markets, as constantly changing sentiment is driving the markets higher and lower on a daily basis. Reflecting increased price volatility and deteriorating market internals the Stadion Investment Model signals an Orange market environment. Continued positive response to the ECB sovereign guarantee package should help stabilize the downward pressure our indications are experiencing. We will want to see positive expectancies in place, mainly through higher price levels, increased issue participation and liquidity before moving our assets back into equities. The declines early last week pushed all of our holdings to their specified sell criteria, and positions were sold as they crossed through that sell criteria. By the end of the week all portfolios were in their most defensive positions. Right now risk levels do not warrant equity exposure so we will comfortably wait for a more opportune time. With volatility comes increased emotion which we will not let blur our long term objective of balancing safety and return.

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