Market Preview: Stocks on Sale?

NEW YORK (TheStreet) -- Everyone knows Warren Buffett's old line about being greedy when others are fearful but pulling the trigger is a whole different matter.

Take Monday's action, for example. After Friday's washout, the S&P 500 began the day trading at a forward price-to-earnings multiple of 12.55X, having pulled back roughly 10% from a near-term high of 1422 on April 2.

And that's almost exactly where it ended the day, adding a fraction of a point to close at 1278. Tobias Levkovich, chief U.S. equity strategist at Citigroup, observed Monday that equities typically don't get the benefit of the doubt when they get cheap.

"The investment community has on various occasions in the past few years seen markets on sale (in some instances, 50%-off type sales events) and yet few investors have dared step in and buy attractively valued merchandise," he wrote. "Indeed, it almost seems as if people will buy most goods and services when their prices drop but that does not happen in the case of equities with individuals generally recoiling when prices fall, waiting for some other brave soul to dip their toes in first."

The biggest fear right now is of a global economic slowdown stemming from a potential confluence of events -- the breakdown of the eurozone with Greece, Spain and Italy all suffering financial breakdowns of varying proportions, a hard landing for China, and the derailing of the U.S. economy's slow recovery by the resulting fallout. Against that backdrop, the valuation argument for buying stocks doesn't count for a whole lot and pointing second-quarter earnings seems silly.

Deutsche Bank though argued Monday that "not everything that can go wrong; will go wrong" and stuck with its year-end 2012 target of 1475 for the S&P 500, explaining that this view puts the risk of a major negative event that resets earnings expectations for corporate America at 15%.

"At under 1300, we believe the market is pricing an about even chance of that happening," the firm said. "Although the situation in Europe clearly warrants caution, in our opinion the risk of a credit crunch induced global recession is lower. Hence, we believe the 'Next 5%+' move from S&P's current price is more likely up."