�What smart bulls do when stock market bears run wild

In spite of Thursday's rebound on Wall Street, analysts still worry about further declines ahead for anumber of reasons. But it would be most unwise to count out the bulls. They're the players to watchas they try to catch their breath.

Which raises the question: What do smart bulls do in a bear market? They're opportunistic, intrepidbuyers, particularly those with long-term goals. They buy stocks selectively -- mainly the so-calledfallen angels that they believe have been unjustifiably pulled down by indiscriminate selling,frequently assisted by computer-directed programs.

So, yes, important lessons can be learned from intransigent bulls confronted by roaring challengesfrom the gruesome grizzlies. One vital lesson: The smart bulls make sure they have ample cashreserves ready to seize such buying opportunities. They raise cash by selling parts of their holdingsthat have already piled up big returns.

This simple rule is usually lost on individual investors who tend to sell only when they urgently needcash. The old-fashioned maxim of "buy low, sell high," is usually neglected when the market isratcheting upward, and many investors tend to sell when the market is already going south -- and it'stoo late.

The bears warn that more market chaos lies ahead that would shoot down the S&P 500 to the 1,600level or maybe lower. And they see further damage for the Dow Jones industrials, already hammereddown below 16,000, and for the tech-heavy Nasdaq, now under 4,500. And even with Thursday'srally, everyone is aware that a one-day rebound doesn't make a bottom.

Apart from the adverse news from China and plunging oil prices, the bears are also regurgitatingfears about an emerging recession, not only globally but in the U.S. But the smart bulls insist thatisn't in the picture.

JP Morgan (JPM) Chairman and CEO Jamie Dimon talked tough, and optimistically, from the WorldEconomic Forum meeting in Davos, Switzerland, during a CNBC interview on Wednesday. "The U.S.economy is in a growth mode," he insisted. Investors should be alert to a disconnect between theslumping financial markets and the U.S. economy, where there's no sign of a recession, advisedDimon.

The market, he noted, is mainly reflecting visit their website the China syndrome, exacerbated bythe sharp decline in oil prices -- but not an economic recession. In fact, he sees the Federal Reserve

raising interest rates as a result of the economy's continued growth. The housing sector is doingwell, job creation continues strongly, unemployment is down, and other sectors of the economy,except for energy, are doing fine, Dimon pointed out.

Also upbeat is Terry Sandven, chief equity strategist for U.S. Bank Wealth Management. He arguedin a note to clients last week that it's premature to forecast a prolonged market downturn in theabsence of rising inflation and looming recession.

Sandven, who helps manage $128 billion in assets, noted that bear markets historically haveoccurred in and around recessions when inflation is heating up, the Fed is fully entrenched in atightening mode and valuations are at extremes. This, he asserted, "isn't our current situation."

So, Sandven is taking is a "modestly constructive outlook," anchored on the belief that the pace ofinflation and wage gains will be moderate, future Fed rate hikes will be deliberate and "globalgrowth, particularly in developed countries, will slowly improve as 2016 progresses."

The current market decline "presents an opportunity to rebalance portfolios and upgrade holdings,"argued Sandven. This should pave the way for sectors and companies that are "growing revenue,gaining market share, and with thematic appeal to perform well in a slow growth, low inflationaryglobal environment," he said.

One lesson from the 2016 market tumble may be "about stock versus sector selection," advisedSandven.

Technology stocks, along with consumer discretionary,health care -- and to a degree the financials andindustrials -- may be good areas to pick out stocks, hesaid.

And here's one recommendation that may looksurprising because of oil's deep plunge: "We arewarming up to the energy sector, believing that thesupply-demand imbalance of oil will begin to narrow

as 2016 progresses," says Sandven.

Sandven has some company there: S&P Capital IQ rates Exxon Mobil (XOM) as a "buy," with a 12-month price target of $96. It's now trading at $74, way off from its 52-week high of $93.45. The S&PEnergy stock price index has slumped 47.3% since its record high on June 23, 2014.

In info tech, Apple (AAPL) stands out among S&P's top stock choices. It has tumbled to $98 a sharefrom a 52-week high of $134.54. In consumer discretionary, Starbucks (SBUX), which has droppedto $58 from $64, ranks high. And in health care, Gilead Sciences (GILD), down to $89 from $123, isranked a "strong buy."

Wall Street has seen this type of a market collapse before, note some astute market analysts, andsurvived and thrived thereafter.

Lisa Shalett, head of investment and portfolio strategist at Morgan Stanley Wealth Management,reminds that the current sell-off is very much like the correction in August 2015 when "global

growth fears, worries about Fed policy error, and clumsy Chinese policymaking, geopoliticaltensions and oil market chaos, added fuel" to the fire.

She doesn't believe the global economic cycle is over or that this is the onset of a bear market."Patience is required, but opportunities for long-term investors are emerging," said Shalett, whoadvised clients to consider focusing U.S. equity portfolios on "stable, quality sectors -- credit cards,consumer staples, telecom, aerospace and health care as well as high-yield bonds -- to potentiallyenhance risk-adjusted returns."

Even before the market opened on Thursday, Ed Yardeni, president and chief investment strategistat Yardeni Research, came out with a report saying the "mighty bull has been attacked by a maul ofbears." But he believes the "bull will survive this grizzly attack," and it may be too soon to "print adeath notice" on this market.

The oil price plunge is one big factor, Yardeni acknowledged. But soon, the market should find outhow much damage the oil shock is doing to the global economy and the financial markets.

If it's not bad as widely feared, "then stocks could stage a big rebound once investors start to believethat the price of oil has finally found the bottom of the barrel," said Yardeni.

Indeed, "the risk of a recession hasn't risen, but the rhetoric has," noted Sam Stovall, U.S. equitystrategist at S&P Capital IQ. As a result, the S&P 500 has been pushed nearly 10 percent lowersince the start of the year.

"Yet the U.S. equity market is beginning to look attractive to us," Stovall said, because the price-earnings ratio on estimated 2016 earnings now hovers near 15 times, versus its average of 16 timessince 2000. In addition, noted Stovall, the "trailing valuation of 15.9 is a more than 8 percentdiscount to the median p-e since 1988." Still, he recalls that this trailing metric remains expensiverelative to the average of 13.8 times since World War II.

And he isn't yet ready to conclude that the market has entered calm waters. Despite the potential fora counter-trend rally, he said, this correction "likely has further to run as lower but still-elevatedmultiples remain a challenge to a V-shaped recovery."

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