Daily Form October 19, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY OCTOBER 19, 2007       03:48 ET

The S&P 500 (^SPC) and the Russell 2000 (^RUT) both registered small body inside day candlesticks in close proximity to their respective 20 day EMA’s. After Wednesday’s whipsaw session the sharp diminution of intraday volatility yesterday could be a precursor to a more directional move either in either today’s trading or early next week.

It feels to me that the market is at a fairly significant inflection point in which seasonal tendencies as we move towards Thanksgiving will be favorable but where there has recently been a deterioration in the underlying positive dynamics that allowed us to recover so decisively after the turmoil in August.

The banking index continued to drift lower in yesterday’s action and as the chart reveals the bearish price action since the index dropped below the 50 day EMA on October 12 has transformed the triangular formation from one with a positive slope through the lows and a suggestion of an imminent upward breakout towards one of a potential break down to new 52 week lows.

The Bombay Sensex index (^BSESN) has encountered major turbulence after piercing above the 19000 level which from a fibonacci point of view represents a 262% uplift/extension of the swing high and low that tracked the August correction. The chart below is as of Thursday’s close and as this is being written the index, which still has two more hours to trade on Friday, has retreated by a further three percent.