Over six weeks have passed since May 6th, the day of the "flash crash" that gave investors one more reason not to own stocks. During this time period, the stock market, in terms of the Dow Jones Industrial Average (DJIA), has traded as high as 10,920 (5/13/10) and as low as 9,757 (6/8/10) on an intra-day basis. At the low point, the DJIA had traced a correction of 13.3 percent from its April 26th recovery high of 11,258.

Aside from the bizarre trading activity on May 6th, the performance of the stock market since April 26th has been characteristic of one that had become "overbought" after a dynamic rally that persisted for more than thirteen months. As stated in our previous posting, we continue to believe that we are in a period of consolidation, during which stock prices should trade in a relatively narrow range. Low expectations, shared by most investors, should serve to mitigate most adverse news that is delivered to the marketplace in the near-term. Although we cannot determine the duration of this consolidation, we believe that the cyclical bull market that began in March, 2009, will resume in the months to follow.

Summertime is often a period where investor interest wanes, trading volume contracts and price movements are sideways to down. In the weeks that follow we plan to be opportunistic should the ongoing stock market consolidation produce any long-term bargains. Although our economy faces multiple headwinds, interest rates are low, corporate balance sheets are flush with cash, earnings have been surprisingly good and the recovery appears to be proceeding at a moderate, but sustainable, pace. History has repeatedly demonstrated that patient, diversified value investors succeed over the long-term. In our opinion, there is no better time than now to adopt this mantra.

This commentary is intended for informational purposes only. It is not an offer to buy or sell any security and should not be considered investment advice.