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It appears that the "Masters of The Stock Market" and the mainstream media are doing their best to scare every "Henny Penny" on Wall Street and the International markets.

Stocks came off their worst levels on Thursday, but still finished sharply lower n heavy-volume trading as a "gloom-and-doom" outlook from the Federal Reserve and Treasury Secretary Geithner added to ongoing economic jitters.

As Friday dawned, another round of aggressive selling pressure abroad had weighed on sentiment before the open.

As the opening bell rang, most stocks had managed to put up some modest gains as many market participants are covering their positions ahead of the weekend.

Worries about economic growth and the threat of contagion in Europe caused stocks to slide about 6% during the course of the past two sessions. Pressure abroad only perpetuated further selling interest this morning, but once Europe's bourses began to bounce the tone at home improved.

Although selling pressure has subsided since the open, there is still a sense of uncertainty among most traders. In turn, action has been choppy as participants look to protect their portfolios from headline risk ahead of the weekend.

The one-year chart of the S&P 500 below shows the extreme volatility of the past couple of months and that we are heading towards some important short-term support:

Chart forS&P 500 INDEX,RTH (^GSPC)

There have been many pundits fanning the flames of concerns about a recession, and one well-read analyst cried out "THIS IS A FULL-BLOWN DEPRESSION", which was to help promote his upcoming conference.

Yes, weak data from China did some crystallizing of economic fears of a global slowdown of a proportion greater than the media led us all to believe.

Now I'm not blaming the media, but I want you to ask yourself what I've asked myself recently, "Doesn't this scenario of extreme panic, bad news and pessimism seem strangely familiar?"

It may be different this time but whether it's Europe's debt crisis threatening to freeze once again the global financial system or Ben Bernanke's "Bad News Bedlam", investors seem paralyzed with fear.

No one seems to want to believe that global growth worries may be overstated. Why? Perhaps it's the continued fear that China and European profits for American companies will be badly hurt by the target nations' internal economic woes and lead to the dreaded "double-dip recession".

As the insightful web site "Wall Street Unlocked" opined back on Sept. 9th:

"Analysts said shares are likely to keep falling because conditions in Europe show little sign of improving. If Europe's economy contracts, U.S. companies will likely be hurt. Half of their revenue comes from overseas, and half of that is from Europe," said Sam Stovall, chief investment strategist with Standard & Poor's in New York.

Mr. Stovall went on to say " 'Maybe the market has already priced in a very, very soft spot, but it has not priced in quicksand -- it has not priced in a recession,' he said. The heck with a recession! Some wise old sages and analysts are saying we are slipping into a depression." (full article)

WHAT TO DO NOW?

Begin by asking yourself if you're overinvested in the stock market, especially with high PE stocks selling at high multiples to their current earnings.

These are the kind of "high-fliers" that could fall a lot further if all this bad press continues or worsens.

Also consider the "worst case scenario" and whether you want to be exposed to the possibility of a horrific replay of November 2008 or worse yet, March 2009.

There's at least a 50% chance of a meaningful "retracement" of those March 2009 lows going on before our very eyes.

“The near-term trading range for the S&P at 1,100 to 1,220 has just been a consolidation pattern, which is likely to see further downside below 1,100,” said Michael Sheldon, chief market strategist at RDM Financial Group. “If we break below that level on heavy volume, then we could be in for further downside near 1,020—that would represent a 50-percent retracement of the bull market from Mar. 2009.”

BUY DEFENSIVE AND PREPARE YOUR "WISH LIST"

Start looking at and consider buying the great defensive names like Pepsi (NYSE:PEP) which hit a 52-week low Thursday and pays a 3.4% dividend "yield-to-price".

Abbot Labs (NYSE:ABT), purchased below $50 (remember it fell to $46.29 on August 9, 2011, a little over a month ago) yields close to 4%.

Intel (NASDAQ:INTC) below $20 a share (at $19.95 the "yield-to-price" would be around 4.2%) would be a terrific "bond-like" investment. They have little debt and are sitting on around $11.55 billion.

If you want to take a bit more "risk", the lowered earnings guidance and "bad news" seems out-on-the-table with FedEx (NYSE:FDX) which hit a 52-week low Thursday at around $64.55 per share. This stock could bounce much higher on better-than-expected results in the 4th quarter of this year.

One of the great names for both defensive and dividend yield is Clorox (NYSE:CLX). This is a company that appears recession-proof and is currently yielding 3.6% It also has a 34-year track record of consecutive dividend increases.

A full 90% of Clorox products are either No. 1 or No. 2 in their category, and shares of Clorox trade at 16 times earnings while the company has a 10% long-term growth rate.

If a person could buy shares of CLX at around $62 their yield-to-cost would be close to 3.9%. That's pretty impressive when the yield on a 10 year Treasury is 1.71% and is taxed as ordinary income.

Other pharmaceuticals like J&J (NYSE:JNJ) with a current yield of 3.5% and Pfizer (NYSE:PFE) with a current yield of 4.4% are looking better and better.

Eli Lilly (NYSE:LLY) is another great example of a Big Pharma stock you could be investing in.

Lilly is the world's 10th-largest pharmaceutical company and has a long history of producing major blockbuster drugs (like Cymbalta or Cialis). And Lilly's success has translated into a steady income stream for investors.

It has a 125-year history of paying its dividend and a string of 42 consecutive annual increases. Its dividend is growing at around 7.5% a year. And right now, it yields 5.2%.

Lilly's stock has taken a big hit in the last few years – down from $60 five years ago to around $36.56 today. Yet it reports that it is making nearly 50% more money today than it did back in 2007.

This means we're paying much less for the same dollar of earnings than we would have three years ago, which is something smart investors like to do.

Big Pharma stocks are among the best stocks when it comes to steadily growing their earnings, your money and paying dividends.

How About a Little "Diversification"--Gold and Silver

While gold and silver are correcting in this "everything is down but Treasury bonds" kind of atmosphere, you might want to see if you'd like to own some more.

Some leveraged ways, almost like "proxies" for owning gold and silver is to buy Royal Gold (NASDAQ:RGLD). I would wait till it falls below $64 before buying, and Silver Wheaton (NYSE:SLW)--which needs to fall to $32.32 before I buy any more.

Before Placing Orders--Look to the "August Lows"

If you're looking for a good "entry price" for one of your wish-list stocks or a solid company that you want to own shares of, go back and see the intra-day lows during the August 8 through August 12, 2011 period that we just recently experienced.

I'm not predicting that prices will fall that low nor do I ignore the fact that prices could fall even lower before this "drama-trauma" plays out. But the market-makers do often seem to repeat themselves when it comes to programming market lows.

Keep your head about you, guard your emotions, know that "this too shall pass" and by all means be thankful about what you have left. Remember that the "smart money" may eventually become big buyers without warning and drive prices higher.

Also remember that "what falls dramatically can also bounce back dramatically", and by the end of December 2011 everything could look much rosier than right now.

The news is being "spun" very negatively, and the best historical time to be a buyer is when everyone is horrified and filled with fearful dread. We're getting nearer and nearer that testing of our investor "mettle".

Disclosure: I am long ABT, INTC, FDX, PFE, RGLD, SLW. Hoping to buy some shares of CLX at $62 or lower.

Source: Panic Hitting The Markets Again--What To Do (And Buy) Now?