At 13-13.5x 2012E EPS, valuations are supportive but not rock bottom. Given elevated short interest and defensive to bearish investor positioning, risk has already been taken down significantly, but there are no signs of panic and equity outflows could restart. Low implied volatilities provide investors with cheap downside protection, but most investors don’t buy such insurance. So, although valuations, positioning and cheap protection provide support, we would be surprised to see a sustained upside break-out this summer because clear soft patch exit signs are unlikely near-term. We are tactically cautious on fears that macro risks shake confidence again and the recently renewed faith in policy support proves fleeting. Earnings season brought a relief rally again, but soon worry season returns and we think the next 5%+ move is likely down.
Bianco's year-end target remains 1,475 and his 12-month target continues to be 1,500.