Looks like just a correction to me

OK I lied. You know I just to chime in again given what's going on.

So, PIIGS the second act, has rattled the markets again. You're going to hear a plethora of opinions and arguments that as to how this is going to play out. I personally think Greek unions and protesters are in serious denial as to the alternatives they face. Either they accept these "savage" terms as they put it, or face even dire consequence. If Greece gets no bailout they will default on their debt causing any future borrowing to be done at terms that will be worse than now. As a result, the government will be in an even worse position to run deficits in order to finance the wages and benefits that these union workers demand. The inevitable result would be for unions to take even more drastic cuts or risk seeing the complete collapse of their economy. That would be far more "savage" than accepting what's being offered now. Another alternative is for Greece to leave the European Union and issue their own currency which would be the equivalent of monopoly money and watch inflation go through the roof creating utter chaos which again is a more "savage" outcome then accepting a bailout.

The situation in Greece reminds me of the dispute between NHL owners and players when negotiating the new collecting bargaining agreement (CBA) of 2005. Much like Greece, the NHL was not economically feasible in the state it was in coming into the agreement. Drastic changes had to be made as player salaries were soaring while most teams were losing serious money. So, owners demanded a salary cap which the players immediately rejected. The players said a salary cap demand was a "non starter" with respect to negotiation talks. This is the equivalent to the "savage" term being used by Greek unions. I remember laughing at the idiot NHL player union because they were in such denial. They figured if they held strong the owners would cave in just like they did at previous CBAs. But this time was different. The owners were far better off locking out the players and cancelling the season then to keep on going the way things were. And that's exactly what they did. They locked out the players. To salvage the 2005 season the owners sweetened the deal a little bit (which still included the salary cap) but the players rejected it.

When the NHL season in 2005 was cancelled a lot of NHL players played overseas for basically peanuts compared to what they were once getting. This reality check eventually sent the players back to the table with their tails between their legs. Not only did the players cave in, they accepted a deal worse than the deal that they could have received before.

Those revolting in Greece will have to come to terms with the same reality that the NHL players eventually faced. They will have to realize one way or the other what they were accustomed to and promised is not feasible. Are they going to learn this the hard way and suffer far more than what they will suffer if they accept the terms of the bailout or will they do what the NHL players did and come back to the table with their tails between their legs? I think they will cave. If not now then perhaps after they get a taste of the reality if they refuse just like the NHL players did.

Getting back to PIIGs, What if this sovereign debt crisis spreads to larger countries like the UK? That's certainly possible and that could make this correction a more serious one. But I think the "bond vigilantes" as they call them, are sending a clear cut message to governments around the world running large deficits and I think governments are going to listen. The 2008 crash is still fresh in thier heads.

No matter how this unfolds, I believe the markets will eventually get over this. I have faith that the rising tide of strong earnings and positive economic momentum will overpower this latest "crisis" because as the economy improves deficits will narrow. On top of this, from a sentiment perspective as I've been noting here for over a year, there is still such strong deeply rooted skepticism/pessimism out there which makes the likelihood of a long term market top being reached quite slim in my opinion. Somehow, someway I belive this "crisis" will be resolved without too much damage.

This correction already looks very similar to that seen in late January. Complacency is quick to turn to fear. We got some large gap downs in the chart, we have already seen a spike in the VIX into the high 20s (close to where markets bottomed during previous corrections) government bonds are soaring reflecting a strong flight to safety and the put/call ratio is already turning up big time. At this pace it won't be long before the gas tank of the bulls will be full again.

I suspect this correction is about 50-65% done. The market is probably going to be very whippy with huge morning headline risk for both bears and bulls. Notice how these corrections make it difficult for those bears that have been burned so badly for the past 13 months to capitalize on. A lot of them I'm sure got squeezed out on Monday or covered yesterday far too early expecting a bounce. I've already noticed this from some of the losers I track.

Bottom line: We got ourselves a correction here which I suspect is about half over. The VIX, put/call ratios and Rydex indicators are rapidly unwinding their complacent status. I'll be very interested to see what AAII sentiment will be come Thursday. The market is likely to be very whippy in the days and weeks ahead with high morning headline risks for either side of the market. Corrections are always a good time to see what your stocks are made of. If they have held their own and didn’t go down much (or better yet if they actually kept going up) it's a sign of great stock. Be careful though, because sometimes what appears to be a sign of strength can be a delayed reaction. Nobody said this game was easy folks. Above all, maintain discipline. If you have to take your lumps because a stop was hit....take your lumps. You can always buy back later on when the dust settles and if it has to be at a higher price then so be it.....get over it. This was something in the past that I found hard to do. Ego prevents one from doing this.

Although I trimmed positions before this correction started flush with cash, I still have some exposure and today I cut loose a position for a loss because it was acting too poorly violating a downside target price. Even though the stock could rebound now because it's oversold, I have no regrets if it does so. You have to have discipline and draw the line somewhere before a loss gets out of control. One thing I won't do is use the "hold and hope" strategy when a position goes against me by a certain ammount. I only hold and hope winning positions not losing ones. Taking a loss is never fun but its part of the game if you want to stay alive long term. Your ego will prevent you from taking losses early and you will get whipsawed at times when you try to do so but that’s the way the cookie crumbles. Remember, you can always buy it back if it starts acting better.