IMO they aren't. Valuations are somewhat pricey, the fundamental outlook is not really good enough to justify premium valuations, and there's the small matter of an 80% rally in just over a year. I don't necessarily think we will have a bone fide bear market like 2000-2003 or 2007-2009, but it wouldn't surprise me at all to see 10-20% lower prices at some point in the next 12-18 months, and I would be surprised if we saw meaningful upside of the same amount (10% gains would put us at 1320, 20% would be 1440). IMO a more realistic upside is to around 1225-1250. Furthermore, the VIX is now getting quite low, we are within 0.5% of the highs, and upward momentum is tapering off in the indices, compared to last year where momentum was strong. There are plenty of catalysts over the next 12-18 months that could spark a selloff e.g. Eurozone defaults, or just the economy stumbling back as the stimulus is withdrawn. I don't think we are quite at the top but I think we are pretty near. Because of that, I think the best posture right now is to have on a fairly neutral market exposure (i.e. be mostly flat or hedged with index shorts), and maybe long a small amount of long-term puts. If we go up much further e.g. 1225-1250, or see some timing indications that a top is imminent, I would be tempted to go net short a moderate amount (e.g. 20-25% short). Any thoughts?