Stock Market Gurus:  What You Should Do Now…

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Is a market move like that possible?

Well, Abby made a similar call last summer.  The S&P 500 was trading at 1,100 when she put out a 1,300 price target.

At the time, many investors were scared out of their wits… just like they are now.  Worrisome news was everywhere and investors had just endured the infamous “flash crash”.

Most investors thought she was nuts…

“No way” would stocks would move higher given all the global worries.

But lo and behold, the markets went on a stunning end of year run to hit 1,300.  Disciplined investors who bought stocks during last summer’s lows made hefty gains as 2010 drew to a close.

Is the same thing about to happen this year?

Well, Abby Joseph Cohen isn’t the only high profile investor bullish on stocks.

In a CNBC interview, Blackrock’s Larry Fink said he would have his portfolio 100% in stocks “if my accountants would allow me.”  He went on to say equities are “historically cheap”, and putting your money anywhere else “is the dumbest thing you can do.”

That may be hard for a lot of investors to understand right now…

The last two months have been dicey for the stock market.  A plethora of worrisome headlines has investors pulling their hair out. They don’t know whether to take their money and run or put it to work at current levels.

For most investors, it’s an extremely tough decision…

Maybe you’re struggling with the same dilemma.  On one hand, you’re worried about all the downside risks to the market.  But on the other hand, you don’t want to miss out if the market moves higher.

Well, let me see if I can help…

There are a ton of worries out there right now.  European debt problems, US debt problems, the end of QE2… the list goes on and on.  These worries are enough to make any investor a little gun shy.

But remember, the market is a discounting mechanism...

In other words, the market takes into consideration current and future events.  So the fears of economic slowdown, the end of QE2, and all these debt problems are already largely factored into current prices.

Sure, there could be a big scary surprise in coming months.  At that point, you would have to reconsider your strategy.

But sitting on the sidelines in cash or money market funds is the wrong move right now.  The recent market tumble has pushed a lot of excellent stocks to multi-month lows.

That means you have some attractive low risk entry points.

Take US Steel (X) for example…


As you can see, this industrial bellwether has endured a lengthy downturn since March.  But now US Steel is looking to rebound.

Why?

The declining wedge pattern (blue lines) and the $42.50 support zone (green line) suggests the downtrend is nearing an end.  In fact, this is the most attractive buy point I’ve seen in US Steel over the past year!

US Steel broke higher yesterday (green circle)…

An analyst upgrade pushed the stock higher out of the technical pattern.  I think US Steel has a reasonable chance of returning to the $55 area.  That would be a sweet 20% return on your investment!

The iShares MSCI Japan Index Fund (EWJ) was one of the most actively traded ETFs yesterday with over 45 million shares changing hands.  Recent data suggests the Japanese economy is pulling out of its post-quake economic slump.
 

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