Today’s market action presented some interesting twists and turns. Around 6AM the SPY got hammered about $3. By the time I turned on my platform we had already bounced around $1. I sold about 25% of my positions and got ready to head for the office. My gut told me that it was OK to sell some stock “in the hole” as global fears were really starting to heat up and this could be a day “there was no bounce”. By the time I arrived at the office we were slightly higher but still well in negative territory.

After the market Open at 9:30AM prices in my positions stabilized and a few went green before the market went positive. I decided to sit on my hands to see how much we might pop. All of my positions with the exception of one raced to the upside and I started to lighten up some more. The SPY was now almost $4 off of its low and I got short. The short was intended as a “scalp” as SPY above 102 would have trouble holding and I would book some quick profits after a small retracement. When the market has come off several days in a row and then zooms up 2% after opening lower the odds favor a strong close. But that was the opposite of what we got. The $1-$1.50 pull back that I considered to be reasonable before a resumption of the uptrend was actually the beginning of a full on reversal eventually leading to an after hours test of the pre-market low.

When volatility picks up like it has since last week I advise our traders to focus on trading the market via ETFs such as SPY, IWM and VXX. The more experienced traders will try their hand at UVXY (triple levered Vix) or even RUSS (triple levered Russia). The next thing I tell them is be quick to take your profits as who knows which direction we will move next. Today exemplified this idea with the Double Rerversal moving from negative to severely positive to then severely negative at the Close. Purple Nurple is a reference to a bit of a torture treatment i got from my older cousin growing up and for many this price action is certainly torturous!

Stay quick. Stay nimble. And if volatility doesn’t collapse in the next three to five days we probably have entered into a different market environment than what has been typical for the past three years.

Steven Spencer is the co-founder of SMB Capital and SMB University which provides trading education in stocks, options, forex and futures. He has traded professionally for 18 years. His email address is: [email protected].

Steven Spencer is currently long BABA, GPRO, P, SPY & USO