Another Buying-Panic Sends S&P Near 2,200 - BofA Sees "More Room To Run", Targets 2,425

Even if the current rally in excess of 20% from the February low is the last one of the cyclical bull market from 2009, BofAML says there should more room to run. The average rally of at least 10% that is the last rally of cyclical bull trend (but not the only rally of the cyclical bull) has an average return of 46.88% (median of 30.97%) and an average length of 13.1 months (8.6 month median).

The S&P 500 is up over 21% from the mid-February low.

Many investors have asked how long can “this rally” last.

Historical data suggest that the rally from February may not be as stretched as some investors may think. The S&P 500 has had 96 rallies in excess of 10%, without a 10% drop, going back to 1928 with an average gain of 34.07% (21.52% median) and an average length of 7.8 months (2.7 median).

Projecting the median and average returns off the February low puts S&P 500 near 2220 and into the 2400-handle, respectively. 2220 coincides with our tactical 2225 projection...

 

The 2400-handle is consistent with recent cyclical and secular breakouts...

 

But there is a potential problem...The 25-day CBOE total put/call ratio has dropped below the lows associated with the prior S&P 500 peaks from April 2016, November 2015, and May 2015.



This overbought or complacent reading for the 25-day put/call ratio exceeds the levels from 2015 and is a risk factor.

At the same time, we note Savita Subramanian's equity market projections: Our S&P 500 year-end 2016 target is 2000.

Our target is currently based on a weighted combination of 1) our five factor framework, implying 2150, weighted at 70%, and 2) a 30% probability that the S&P 500 retests its recent lows near 1800 by year-end., giving us an official year-end target of 2000.

And 10-year Target: 3500...