Brain Sabotage.
Red candles. War headlines. Oil surging. The perfect environment – not for a market crash – but for your brain to sabotage you. Our logical brain – the one that understands the ITM strategy – often gets pushed aside by something much older and much louder. And that’s when things can go off the rails.
The Emotional Reptile
In the ITM books, we briefly went into the ‘structure’ of the human brain:
- Neocortex: Logic, planning, strategy
- Limbic system: Emotion, memory, threat detection
- Reptilian complex: Instinct, survival, automatic responses.
Of course, we like to think that we are always rational, but when red candles dominate and the news turns grim, logic often hands over the wheel.
The End of the World!
When fear kicks in, it triggers a biological chain reaction. The amygdala (limbic) fires an alarm, the hypothalamus activates the fight-or-flight response (reptilian), and suddenly your body is preparing for danger – heart racing, palms sweating, adrenaline pumping.
Panic!!!
At that point, your brain isn’t managing a portfolio. It’s trying to survive a threat.
That’s when the “logical” finger hits Sell – not because the ITM strategy said to, but because your survival wiring demanded it.
Sound familiar?
The Iran Situation
Currently, we are seeing this play out in real-time. With the military conflict in Iran, disruption in the Strait of Hormuz, spikes in oil prices, constant negative headlines – the “End of the World” narrative is easy to find. But for a disciplined trader, the real danger isn’t the event. It’s the psychological cocktail it creates: Recency, Anchoring, and Confirmation bias.
Recency
Recency bias is the tendency to give disproportionate weight to the most recent events while ignoring long-term data. When markets fall after days of negative headlines, the brain assumes the trend will continue indefinitely.
Anchoring
Anchoring occurs when you fixate on a specific price point—usually the peak of the market or your own entry price—as the “true” value of an asset. But the market does not have a memory. Only traders do. By anchoring to the past, you stop trading the chart in front of you and start trading a ghost.
Confirmation Bias
Once fear takes hold, the brain stops asking “What’s true?” and starts asking “What supports my fear?”
A Quick Check
But what do we DO???
You can’t stop fear. It’s biological. The goal is to stop fear from making your trading decisions. Recognise what’s happening: your brain is trying to protect you by exaggerating recent events, clinging to old prices, and searching for confirmation of danger.
Because when the world feels like it’s ending, the chart usually tells a different, more nuanced story. So instead of reacting to headlines, let’s look at what the charts are actually telling us.
To the markets
An even more dismal week. Why can’t everyone just play nice so that we can get on with trading? Ok, just joking, Markets don’t care about what we’d prefer – they respond to reality. And right now, reality is messy. I am not trying to make light of the situation – but don’t you just long for some peace and quiet? Although I seem to remember a few weeks ago I was complaining because nothing was happening. Hmmm. Getting what you wish for . . .
SPY Charts
It’s not looking good. There is probably an imminent death cross, and that (when confirmed) will be our OUT signal.
It reminds me of this time last year – when we got a death cross in March and so ITM missed all the April pain when the market was flirting with the bear (which we briefly touched intraday) and reentered in May when it was all over.
On the long term chart SPY is heading south. Right now it is in the middle of the trading channel established since 2020. If it heads to the lower bound (as it did last year) then we would be looking at a drop to 580 – 600.
SPYG Charts
Not good news – we have a death cross, and it is confirmed. Time to exit SPYG trades.
The long term chart confirms the diagnosis:
QQQ Charts
We got out of QQQ some weeks ago. I still am finding it hard to believe that it is going down while AI is such a success story – but the charts don’t lie.
Confirmed by the long term chart – looks like it is breaking the blue support line.
VIX Chart (Volatility)
Elevated volatility, but not as much as last year . . . yet.
ITMeter
Hmmm . . .no one told me I had the ITMeter around the wrong way last week . . .perhaps no-one takes any notice of it? Rethinking this now.
The week ahead . .
Obviously, the war in Iran and what’s happening in the Strait of Hormuz will dominate the market – but here is what else is happening:
Monday – March 23
• PMI (Manufacturing & Services) flash data released.
• Early snapshot of business activity and economic momentum.
Tuesday – March 24
• Consumer Confidence Index.
• Key read on sentiment and potential spending trends.
Wednesday – March 25
• Durable Goods Orders.
• Insight into business investment and demand for big-ticket items.
Thursday – March 26
• Initial Jobless Claims and Final Q4 GDP (revision).
• Labor market health and confirmation of economic growth trajectory.
Friday – March 27
• Core PCE Price Index (Fed’s preferred inflation gauge).
• Markets likely to focus heavily on inflation signals and policy implications.
The Futures
Not looking good, but not disastrous.
Some light relief
After the dismal charts I thought this may amuse you. I asked AI to generate a header image to illustrate the reptilian brain. Here’s the instructions:
Fingers crossed for a good week!
Heather
Trade the tide – not the waves
