Weekly Commentary
August 25, 2010
The S&P 500 has now declined over 6% from the overhead resistance at the 1130 level, reached in early August. Trading volume has continued to decrease steadily over the last few weeks, with several of the lowest trading days of the year occurring recently. With the equity markets continuing to slide, all of Stadion's trend indicators are now off, and continue to trend in the negative direction. Market breadth also remains unfavorable with large declining volume versus advancing volume and the new high new low ratio sliding as well. Investor sentiment measures also confirm adverse flows from small caps to large caps, and an overall flight to quality within all market segments. The S&P 500 is very close to reaching the technical support level at 1050, established in February and retested again in June. If the market declines through that level we will likely see it fall to the next support level established in July, at 1025 on the S&P. On the other hand, we could see investors begin to take advantage of depressed prices at the 1050 support, and increase prices. We are now at a crossroad, and the Stadion Investment Model is well positioned to take advantage of whatever happens. If the market declines, we are already defensively positioned to minimize any drawdown. If on the other hand the market begins a new upward trend, the Stadion Model is close enough to a positive signal that we should be able to begin adding equity allocations shortly after the trend begins. For now we will wait and see what the market has in mind, and make any changes to the portfolios as necessary. - SMM-082010-180Looking for more insights?
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