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Intraday Market Notes -- July 13

2:15 pm ET: It looks like we got that bounce off of the SPX's channel bottom that we mentioned yesterday (scroll down to see the chart). The bulls have another day of respite but the real question is can they stay in control?

Last night China reported numbers that reflect the contracting global markets--and what do we get? A rally! I'm wondering what would have happened had they fudged the numbers higher (and many Wall Street pundits do believe that the Chinese are fudging their economic data). Reports from the Chinese mainland not only confirm the contraction but are indicating a far worse scenario: dwindling factory orders, unoccupied office buildings, and heck, even ghost towns. These are not signs of an economic expansion, folks.

What all this is saying is that our stock market is beginning to look like a house of cards; the more we rally higher, the more precarious the situation. It would not at all surprise me if I wake up one morning and find that the major averages have fallen off the cliff on no apparent news. But I do believe that before that will happen, the VIX needs to fall a bit further (we haven't entered the overly complacent stage yet). If last year's charts of the major averages are any indication, we should see another week or so of upward movement followed by a sharp correction. (Last summer's correction was 20% on the S&P.)

So, if this scenario is really in the cards (keeping to the card theme), what's an investor to do? Now is the time to take out some protection on your long positions (by buying individual stock puts on large positions or buying index puts on the entire portfolio) or else begin taking profits especially on those issues where you'd have the most to lose.

My apologies for all the gloom and doom but after all, this is Friday the 13th--what do you expect?