I began to see risk points as potential triggers of the correction: 870 resistance level, earnings, stress tests, etc. I even began observing weak signs of distribution and sector rotation, wondering if they were signals of a top.

Here's one of the keys to the problem: There's no such thing as a market being “overdue” for a correction. This is pure nonsense. There's no reason why a market has to behave in a fashion that one is comfortable with. Past experiences are only relevant to the extent that current circumstances are analogous. In this case, they weren't. So leaning on past experience was a mistake.

Closely related to the above point, I made a mistake in assigning too much importance to conventional technical analysis. Technical analysis is based on recognizing patterns that in the past have tended to repeat. Here's the catch: Most of the observation points for patterns occur during normal times. The problem is, there's nothing average or normal about the times we're living in. Thus, to expect past conventional patterns to repeat was a basic mistake. To seek comfort in such patterns was a mistake, too.

Another problem was that I wanted to protect gains. This is natural. However, it's not a constructive emotion. In stock-market trading and investing, one must mark to market every day. That means that you never have gains; it's all capital. And you're never making up for losses. Losses are gone; they don't exist. One’s realized/unrealized profit & loss is an irrelevant factor in an investment decision; the market doesn't care whether you're sitting on gains or losses. Thus, this factor needs to be blocked out of one’s mind. This is incredibly hard to do.

So the essential problem here was emotional, not intellectual: I sought comfort in past patterns. And I was uncomfortable with the fact that I was sitting on enormous gains that I didn't want to give up. Thus, I was psychologically predisposed to fall into a correction theory that would simultaneously allow me to take profits and at the same time, place me in a comfort zone in terms of past experience.

So where was the “hitch in my swing”? Certainly, there was a hitch in my reasoning process, which became biased with some of the emotional factors I described above.

But please pay attention: Ultimately, the biggest problem was not the hitch in my reasoning.  It was the fact that I swung at all.

Given the contradictory cross-currents that I had identified, I should have simply let that ball go by. All of the flaws in my reasoning might not have produced a single dollar of losses if, at that moment, I'd simply had emotional clarity and discipline.