Daily Equity Comment Part 1 10/19/07

While it was evident after yesterdays daily pattern that a decline had about an 85% probability, I have to admit that while I have been short term bearish I did not expect such a large decline.

I certainly am not complaining, as it took a crap day trading week on my part and turned it completely around and them some! : )

It also helped out our aggressive equity trading account which as you know has been comprised of nothing but short positions since last week. I will be taking most of the short trades off the table however as the market looks close to a short term low here.

The decline on the whole however is not complete as this entire decline from 1570 on the S&P 500 took the form of 5 waves down and a correction will not terminate when 5 waves down is the first pattern to develop.

This brings into play of a counter trend move back up, perhaps making up 50 to 62% of the decline followed by one more leg down.

There simply is too much bullishness right now to even begin thinking of a sustainable move to the upside.

I am confident that this correction should weed out most of the complacency.