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No need. In fact, this is finally one of those times when we could do this “in our sleep.” One of the most common questions I’ve heard in the last week is, “Do you think the correction is over yet?” Exsqueeze me? A baking powder?

Let’s back up, take a breath (no, really, take a long, deep, cleansing breath), and look at what we’ve got. Not what “they say” on CNBC. “They” have a vested interest in keeping our stomachs knotted up. Here’s what we’ve really got:

Pretend for a minute that you’re looking at a chart from 1992. Detach from the anxiety of the present moment and the emotional attachment to the balance of your 401(k). This chart is as clear a trend break on super-high volume as you’re ever likely to see. If we were looking at a chart from 1992, it would take about half a second to read it.

If those guys in 1992 were trading on any timeframe longer than a couple of weeks and shorter than a few years, they should have been in cash for a week now, waiting for the chart to signal a new entry. Anticipating a short on the resumption of the down thrust. If it goes up, look to re-enter long once an uptrend has clearly been re-established (weeks, maybe months). Otherwise, wait for the signal.

This is a swing trader’s playground. Short for a few days, long on the reaction, short on the reaction to the reaction, etc. When people get scared, they start to act purely out of emotion, and when people act out of emotion, the charts clear up considerably, like a fuzzy picture coming into focus. People become more predictable. Like if you walk into the middle of a herd of Angus cattle and scream. You don’t know their individual personalities, or what they think about their future, but when they panic, they all react predictably. (Well, except for that stupid one over in the corner of the pasture, chewing on his cud and uploading pictures of naked heifers to the internet.)

That’s what charts are, after all. Snapshots of people’s current emotional state with regards to a stock or the market. Not the result of cold, rational decisions as we’d like to believe. It’s why stocks trade at multiples, and not at book value. Opinion, charged by emotion. Doubt whether we primarily operate from emotion? Just observe today how many cold, deliberate, rational people you see. And observe how many times you hear the phrases “Do you think” and “I think” followed by an emotionally-charged statement.

Unfortunately, it’s our emotional state that is behind many poor decisions, in life and in trading. The whole point of technical analysis, paper trading, chart reading, even so-called “fundamental analysis”, is to develop the skill to make prudent decisions in spite of our emotions.

So, in answer to the Big Question, I don’t know. I never do. I just try to trade the charts like a complete moron (if you don’t follow Dave, this is a compliment to him- it’s how he refers to himself). Right now I see a lot of sweet shorts setting up. If they rise a bit more, they’ll become a lot of sweet longs setting up. That’s it.

None of this really applies to daytrading, of course. With daytrades, we can go long or short at any time on any day. That’s what we love about it, and the recent volatility and “people acting like cattle” just makes it that much more lucrative.

I’m off to the dentist. Writing with a toothache sucks.