Emotion or High Awareness?

Over the last 14 trading days, the market has carried us through much of the emotional spectrum; Complacency; Fear; Uncertainty; Optimism; and back to Uncertainty.

Strong economic reporting, spurred by the combination of regulation claw back, policy addressing trade imbalances, and passing of the Tax Cut and Jobs Act; allowed investors to grow content to sit in positions as the market worked steadily higher.

In just 3 trading days Fear replaced Complacency as the market corrected 12%. Then last Friday, after stopping 1.25 points short of testing the Tuesday ESH low of 2529.00, to create a double bottom; Uncertainty replaced Fear.

When candle bodies printed back above both the ESH 50 D EMA and Top of ESH Daily Equilibrium Cloud (Ichimoku Kinko Hyo) on Friday, February 16th and Tuesday February 20th; Optimism for the start of the next leg up replaced Uncertainty.

Now imagine not having experienced any of those emotions. Instead you had the clarity to stay focused on technical triggers alerting you to the potential for significant price retracement. You initially projected a 5 % retracement to the 2730 area then recognized the market was not bottoming. This allowed you to anticipate the 2552 area (.382 retracement back to Nov. 16 low). Once the market achieved this objective you again looked for evidence of the market bottoming and confirmed the double bottom. Then you looked for confirmation for the market to begin its next leg up.

Your process was focused on maintaining high market awareness. Instead of anxiety, clarity and focus kept your energy levels high. You had a future vision. Defined the triggers. And trusted yourself to execute.

Yesterday, when the ESH closed back below its 50 D EMA and inside its Daily Cloud, did Uncertainty return or were you focused on your future vision? If you were controlled by emotion instead of high market awareness then you need to strengthen your process.