Ride Big Tech to Big Gains in Back Half of 2012

Editor's note: As part of our partnership with Nightly Business Report, Jill Malandrino of TheStreet's Options Profits joined NBR Monday (see video and transcript here) to reveal her trading outlook for the remainder of 2012.

NEW YORK (TheStreet) -- Here is a common dilemma for many investors: We all want to earn higher returns but are afraid to commit capital as the market continues its grind higher. Believe it or not, this is actually a product of a bull cycle.

Investors keep their money in cash or low-yielding money markets and bond funds for fear of "missing the bottom." It's totally understandable as we are inundated with shaky macroeconomic data and global headline risk. Yes, there is plenty of reason to be concerned about macro measures, and we are not out of the proverbial woods, but let's take a step back and review the first quarter of 2012.

The S&P 500 finished up over 12%, and that's outstanding for just one quarter of performance. Should we break out the bull-market party hats? No. We expect second-quarter choppiness, especially with the "Sell in May" psychological overhang. But the corrective action and consolidation we have seen is a good thing (as Martha Stewart would say).

And don't forget that the Federal Reserve has an arsenal of quantitative easing tools in its war chest should data results get strained. Not that trading and investing should be predicated on that, but as we have seen, fighting the Fed and the tape has not exactly worked out. As we say in trading, the trend is your friend!

Is it too late to put some cash to work in the equity market? Absolutely not. Fundamentally and technically, the back half of 2012 is lining up for some nice returns, and now is an attractive time to get in. Current stock prices represent attractive entry points into the end of the second quarter, as expectations were for less-than-stellar quarterly corporate earnings, but, in fact, results and guidance for the third quarter and the second half have been quite good.

Of the 297 S&P 500 companies that reported earnings as of April 27, 57% are beating top-line forecasts, while 73% are surprising on the bottom-line. Yes, we saw some profit taking as investors wanted to reap some rewards for being patient. But that was met with fresh buyers looking for cheaper levels to get involved.

In addition to attractive stock-price entry points, U.S. economic data is notably stronger in 2012 compared to the last 4% correction in 2011. Housing starts and home-price trends are coming in at levels better than 2011, as are auto sales. First-quarter consumer spending grew at an annualized rate of 2.9%, the fastest since the end of 2010. Finally, non-farm payroll data is trending higher as well, up 29% from the same situation last year.

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