The action is really picking up now, especially the fear.  With the VIX climbing to reach big levels in a short time...we haven't seen these spikes in fear since late 2008...we could be in store for some big flushing of positions.  Yes, we're in the midst of a correction, the question always being how much is enough.  The market will tell us the next course of action, but right now is a good time to trade small and/or trade quick.  For the daytrading adventurer, taking advantage of the volatility as the market tries to make some sense of things is a good play.  How to best get paid?  Keep your eye on the prize, smaller profits and be flexible...play the market from both sides.   Below is a 15 min chart of the VIX, and you can see how this is quite persistent on the upside at the respective marks.

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Gut-check Time for the Bulls

If your timeframe is longer term, I would have to say the bulls still have the upper hand.  Let's look at some facts here:  the SPX is still 53% above the low reached eleven months ago, the VIX is down more than 50% from that 2009 peak level of 58 in January, and most banks are far and away in better condition than they were just a year ago...on life support.  So, we're in the midst of a correction, and who didn't expect one?  Raise your hand if you thought the market would have corrected sooner?  I see many of you raised your hand...me too.  However, that notion doesn't live long if you LISTEN and WATCH the market action...it's perception and not reality.  That being said, the market is telling us more downside may be in store after a quick jump up to resistance (see chart).                   

Taking the Elevator Up and the Window Down

As you see from the chart below, it took only days to wipe out weeks worth of gains.  That's how it works on the spectrum of fear/greed.  There is no symmetry between these two emotional responses, your cash is the issue here.  Some out there who don't give a hoot about building their stack but are only focused on the outcome are best at this game.  For me, being flexible and observant is sometimes better than being aggressive.  I know the conditions that I prefer to trade, and if it's not fitting my style I'll wait it out.  PPC (protect precious capital) is a decision and a choice that is often rewarded when the right conditions are set.  

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