Stocks continue to churn without making any real progress: Since May 20 the Wilshire 5000 Index, the broadest gauge of the U.S. stock market, has lost about 1%. But boy have things been volatile: There have been new fewer than six sessions since then (out of 13) that have resulted in a change of more than 1% for the Wilshire. As a result, many are throwing their hands up in disgust and moving to cash.

Investors are worried that simple trading strategies are doomed to fail, and  that they’re fighting a losing battle. There is a lot of anecdotal evidence that the capitulation point is being reached. A friend forwarded an email to me from his financial manager in Dallas in which he alert clients that he is selling ALL assets and putting the proceeds into cash. And it’s not just the little guys. BMO Capital Markets technical analyst Mark Steele told clients last week to “to go to cash, or cash-like instruments to the maximum of your mandate.”

The concern for a lot of these guys is that the S&P 500’s long-term momentum indicator looks like it’s on the verge of breaking down. You can see this in the chart above, which shows the 200-day moving average of the S&P 500 with 5% envelopes. Unless the bulls turn things around right here and right now — as they did back in 2004 (blue arrow) — then it’ll be time to pack it in and prepare for the worst (orange circle highlights 2008 breakdown).

From the perspective of fundamentals, there’s plenty to be optimistic about despite the severity of the market decline since April: According to Credit Suisse, only 20% of the time have equities fallen this far from a peak without a sharp slowdown in the economy. But on the other hand, economic double-dips are very rare — happening just once in the last 90 years as the Fed fought inflation in the early 1980s. The situation is what practitioners call a “fat tail” event — in reference to the probabilistic bell curve you learn about in statistics 101.

Simply put, something big is going to happen. Maybe it’ll be good. Maybe it’ll be bad. But the likelihood that stocks stay near current levels is low. Either we get the mother of all rebound rallies, or this sucker’s goin’ down. There’s no third option.

Credit Suisse analyst Andrew Garthwaite weighed the evidence for clients this week and pleaded with clients to not give up on equities. He listed a number of positive economic factors; including corporate cash levels, capital spending plans, global PMI indices, job growth projections, housing affordability, cooling inflation in China, and impressive profit margins.

But the thing that resonated with me the most was valuation levels: Right now, very long-term measures of valuation put the fair value of the S&P 500 right at current levels. Looking at the consensus earnings per share estimate of $87.60, however, gives a prices to earnings multiple of less than 12x. That’s well under the long-term average of 15x.

Wait, it gets better. Looking at average price multiples going all the way back to 1871, Garthwaite finds that the P/E ratio should be closer to 19x right now based on where inflation is (around 2%). That would put the S&P 500 at 1,664 — which would be worth a 58% rise from current levels.

There is no magic bullet here for guaranteed profits, but as a rule it appears that the market is not going to stumble much further. So a simple trading strategy of sticking with stocks may be your best investment right now.