The Pro's are not very short the big contract on the SPX COT, so I don't think they're very bearish here.
That may have something to do with the technical areas being tested currently. If you look back at the end of 2003, the commercials were positioned about the same as they are now, and they remained that way through much of 2004 as the SPX corrected 9% into August 2004.
I was a bit taken aback when I noticed how long the commercials still were this month, but taken in context with 2004's historic positions and correctinve market action, it seems to work OK with me.
I don't have a chart in front of me, but isn't there a possibility we're in some sort of "B" off the SPX 1163 highs in early 2004? That would work best with the launch I'm anticipating off an October 2006 low and into early 2008, as that could be a "C" wave up to match the "A" up from 768 to 1163.
If we get a 10% correction in the SPX off an anticipated (by me) 1295 high in early Jan 2005, a "C=A" move on the SPX would take us to a test of the 2000 highs in the neighborhood of 1560 SPX by early 2008.
BTW, I have some contacts in Chicago that tell me many of the luxury retailers there are seeing sales drop 50% YOY from 2004. The problem seems to be over-leveraged home purchases financed by ARM's that are rising every 6-weeks. Add in high utility costs, higher property taxes, and down-sizing and you have a recipe for a housing correction in that area.
Chicago has been a bit of an aberration in the midwest, as the suburban Chicago areas participated somewhat in the housing bubble, unlike the rest of the midwest US. However, that is coming to a screeching halt.
All this seems to line up with expectations.
The proposed C wave into 2008 would also give us a multi-year "B" wave that would fit in with my expectations going forward.
As for the Yellar stuff, it may need to correct into March if we get that monthly stick flipping longs the bird like it is right now.
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