Today's action was very positive and afterhours reaction to SNDK and YHOO appears to be positive so the bounce may continue tomorrow, but I would expect at least one more down wave to complete a 3 wave correction from the recent high. The action in the financials was especially encouraging today with an outside reversal bar in JPM up 9.57% and WFC bouncing off of the recent downtrend line with a gain of 10.65%. My hunch is that this week will be flat overall and the rally should resume next week. It will be very bullish if the Dow can hold above 7750 and the Qs above 31.21, but we will see.
There are hardly any new lows and the summation index keeps moving higher which again supports the bullish view.
I finished reading Trading Chaos, 2nd Ed. by Bill Williams & Justine Gregory-Williams this weekend. It was interesting, but long on psychology. I am using the technical aspects of their work a great deal in my trading. I think it truly is the easiest and best way to trade, but I have adapted my own risk management techniques which work better for intermediate term trading.
Psychology is important, but a quite overworked area in trading. I remember several years ago paying a golfing coach to help figure out why I couldn't hit a golf ball. He spent the entire time talking about my emotional state. My emotional state was one of frustration at not being able to do something that otherwise appeared relatively simple. Well, needless to say, even when I was relaxed and calm, my slice was severe. Years later, I watched a golf video in which the instructor claimed that he could teach anyone to hit the golf ball straight. I had to watch it several times before I saw what he saying, but I went immediately to the driving range and was able to hit the golf ball straight. Now, if for some reason I hit an errant ball, I know exactly what I am doing wrong, and I can hit the ball straight whether I am angry, calm, excited, sad or happy. The point is that trading is simple, and once you understand how to do it effectively, your emotional state should not affect the outcome. Your emotional state only comes into play if you it prevents you from doing the simple things you need to do to be effective. Successful trading will then lead to even more successful trading in a virtuous cycle.
If you are not being profitable and successful in your trading, look to find a mentor who is successful and follow them until you are successful. Your emotions will take care of themselves.