I've been worrying about the chart below for over 6 months now – and here's why.

In my Commitment of Traders analysis of the equity indices (S&P500, NASDAQ, Dow, etc.) I've always used the large contract (SP) data to analyse what the Professionals are doing – and pretty much ignored the Emini contract (ES) and others. A larger data set and some back testing convinced me that the Commitment of Traders data for the SP contract was superior.

Emini Now the Largest Index Trading Vehicle (adjusted open interest, monthly)

Well, the chart above shows that over the last year the Emini has not only overtaken the SP contract but has now become the largest component of the equity index futures market with just over 50% of total open interest. And yes, I've adjusted all the contracts for their relative margin size – so the Emini open interest data is divided by 5 so it's directly comparable with the SP contract, etc.

So the question is – should I change my Commitment of Traders analysis from the large contract (SP) to the Emini contract (ES)? In short, the answer is "No" and here's my reasoning.

Changing "Character" of the Large Contract (SP) Market

Large Contract Becomes a Position Trading Vehicle (SP monthly)

Over the last 10 years several things have happened to the large contract (SP) market:

• Trading volume peaked in 1998 and has been in a slow, steady decline ever since
• Trading volume moved to the Emini (ES) contract with its electronic trading, lower margins, 24 hour trading, etc.
• Turnover (ratio of volume to open interest) in the SP also declined from 8 to 1.5
• After 2003, volume traded started to peak every 3 months with contract rollover
• During contract rollover months turnover was approx. 2.0 and during the other months turnover was approx. 1.0

These last 2 points are critical – they show that the large contract (SP) has become the de-facto position trading vehicle. An SP position is entered and typically held for a month and only occasionally rolled over at contract expiry.

Success of the Emini Contract (ES) as a Day Trading Vehicle

Emini Contract Becomes a Day Trading Vehicle (ES monthly)

By contrast, the Emini contract (ES) has seen the following evolution over the last 10 years:

• Trading volume continues to grow steadily and is now averaging approx. 2 million contracts daily
• Emini (ES) trading volume is now 13 times larger than the large contract (SP) – adjusted for margin
• Turnover (ratio of volume to open interest) in the Emini has been steady since 2003 at approx. 18 times, and
• The quarterly volume traded peak with contract rollover (seen in the SP) is much less pronounced

So Emini (ES) turnover is approx. 18 times, compared with approx. 1.0 times for the large contract (SP) in non-rollover months. The Emini (ES) has become almost exclusively a day trading vehicle.

Commitment of Traders and Professionals: Large Contract (SP) versus Emini (ES)

Lastly, the chart above shows my weekly Commitment of Traders chart and the Professionals' position. Normally I show the top pane with the large contract (SP) Professionals and as you can see it has relatively large and smooth swings. However, the bottom pane shows the Emini (ES) Professionals. The swings are a lot smaller and appear almost random, week-by-week. For me this shows that the Emini Professionals are less directionally committed and reinforces that the Emini is a day trading vehicle.

Conclusion: I'll be sticking with the Commitment of Traders analysis using the large contract (SP) as I believe this gives me a better indication of the longer term direction of the equity indices.

Finally, This Week's Commitment of Traders Charts

Commitment of Traders: Professionals -7.3% (short)

Professionals continue to reduce their Short positions to -7.3% of total open interest this week. As a result of the analysis above I'll be dropping any comments to do with the difference between ES and SP Professionals (red line above).

Commitment of Traders: Oscillator -152

The Commitment of Traders Oscillator is at -152 and over-sold. Since we broke below the zero line this week, the peak in the last swing at 1,147 has now been marked with a red dot. We're yet to see a slowing in last week's decline and bullish divergence or Professional accumulation patterns, so this week's trade might get bumpy.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

After a dramatic down week on the Emini, here's what the Commitment of Traders charts are showing:

Commitment of Traders: Professionals -13.7% (short)

Professionals continue to reduce their Short positions from the peak of -19.3% six weeks ago to -13.7% of total open interest this week.

The Large contract (e.g. SP) Professionals are still more bearish than the Mini (e.g. ES) contract Professionals with the difference standing at -14.4% (red line above).

Commitment of Traders: Oscillator +32

The Commitment of Traders Oscillator reached a peak of +133 seven weeks ago. Since then it has rolled over and this week is reading +32. I think this week's high of 1,147 will represent the peak of this swing in the Commitment of Traders Oscillator (plotted once the Oscillator crosses the zero line).

Going forward we'll either poke below the zero line and bounce or continue down to oversold levels around -100. The volume over the last 2 days was extreme and could represent Professional buying – we'll know by mid-week if the index starts to level out. The strength of any bounce later in the week will determine if we've just peaked and are heading into a medium term down trend. I'll be looking for "No Demand" volume patterns under the 1,147 level to signal this scenario.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +4.5% (long) and Oscillator -74

The Professionals started to get long the US Dollar this week and are currently reading +4.5% of total open interest.

The US Dollar Oscillator has now dipped below the zero line and is reading -74, close to over-sold and in the buy zone. Since the US Dollar Index is advancing this shows a possible continuation of the uptrend.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

Emini-Watch is back after a Christmas break. Haven't updated the Commitment of Traders analysis for a month – so let's see what has happened:

Commitment of Traders: Professionals -15.7% (short)

Professionals have been reducing their Short positions from the peak of -19.3% a month ago to -15.7% of total open interest this week.

The Large contract (e.g. SP) Professionals are still more bearish than the Mini (e.g. ES) contract Professionals with the difference standing at -13.7% (red line above).

Commitment of Traders: Oscillator +44

The Commitment of Traders Oscillator reached a peak of +133 just over a month ago. Since then it has rolled over and this week is reading +44.

I'll post my updated swing trading charts with some comments over the next few days.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals -9.2% (short) and Oscillator +103

Big change during the last month in the Commitment of Traders report for the US Dollar. The Professionals have gone from +34% Long to -9.2% Short.

The US Dollar Oscillator also crossed the zero line, peaked at +123 in the over-bought region and has now rolled over. This week's reading is +103 (note: last bar on the chart reads +81 but last week's reading was +103).

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

The Commitment of Traders reading has now reached -19.3% – a level we've not seen since March 2001.

Commitment of Traders: Professionals -19.3% (short)

Professionals continued to add to their Short positions last week. The Commitment of Traders is now reading -19.3% of total open interest, down from -17.8% last week.

The Large contract (e.g. SP) Professionals are still more bearish than the Mini (e.g. ES) contract Professionals with the difference standing at -25.4% (red line above).

Commitment of Traders: Oscillator +113

The Commitment of Traders Oscillator has now rolled over from +133 last week to +113 this week. We're at a "make-or-break" level and Xmas is approaching.

We're sitting just under the 1,115 level but lacking sufficient demand to push through at the moment. We're up in the pre-market on Monday morning but this could be a setup for Professionals to take profits.

Typically the lead-up to Xmas is bullish – not that this year's seasonality pattern has been typical. But fund managers tend to leave large changes in asset allocations until the New Year.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +18.5% (long) and Oscillator +75

After 2 weeks of US Dollar strength, the Professionals have taken some chips off the table. The net Long position has come down from +34.3% to +18.5%. The US Dollar Oscillator has also crossed the zero line and reached +75. Crossing the zero line allows us to identify the low of the last swing – 2 weeks ago.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

The Commitment of Traders reading has now reached -17.8%.

Commitment of Traders: Professionals -17.8% (short)

Professionals continued to add to their Short positions last week. The Commitment of Traders is now reading -17.8% of total open interest, down from -16.2% last week.

The Large contract (e.g. SP) Professionals are still more bearish that the Mini (e.g. ES) contract Professionals with the difference standing at -21.3% (red line above).

Commitment of Traders: Oscillator +133

The Commitment of Traders Oscillator ticked up a fraction this week from +129 to +133. Overbought and looking like it might make a bearish divergence pattern with lower high point.

Trend Line Congestion (Emini daily)

We've now had 6 days within a tight Congestion range on the Emini. We're likely to see larger volatility coming soon. My bias is to the downside (Commitment of Traders, monthly cycles on US Dollar, Profit Taking and No Demand patterns), however, we could see one more upside break with exhaustion volume.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +34.3% (long) and Oscillator -41

Professionals continue to maintain their Long positions on the US Dollar this week. The net Long position reading is +34.3% of total open interest. The US Dollar Commitment of Traders Oscillator is now at -41.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

Apologies for the last email that was sent out – I changed one setting in my Feedburner account and it ended up sending out a torrent of past updates. Hopefully, problem fixed.

Commitment of Traders: Professionals -15.9% (short)

Professionals continue to add to their Short positions this week. The Commitment of Traders is now reading -15.9% of total open interest, down from -14.7% last week.

The Large contract (e.g. SP) Professionals are still more bearish that the Mini (e.g. ES) contract Professionals with the difference standing at -19.8% (red line above). This is not a good development as the SP Professionals are usually a better indicator of market direction.

Commitment of Traders: Oscillator -28

The Commitment of Traders Oscillator ticked up a fraction this week from -42 to -28. Not sure this is significant – just a glitch in the calculation. We'll have to see.

I'm still bearish on the Emini and think we're watching a slow rolling over. We got a "No Demand" volume pattern on the weekly chart. Plus we're about to make a cycle top on the daily chart – the second after an "End of Trend" warning signal and very significant for me.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +31.5% (long) and Oscillator +28

Professionals continue to maintain their Long positions on the US Dollar this week. The net Long position reading is +31.5% of total open interest. The US Dollar Commitment of Traders Oscillator is now at +28.

I hope you caught my video on the monthly charts and cycle analysis. I still think we're seeing a gradual change in theme from equities, gold, commodities and emerging markets (risk/carry trade) to US Dollar, cash and bonds.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

Commitment of Traders: Professionals -14.7% (short)

Professionals continued to add a little to their Short positions this week. This week the Commitment of Traders reading is -14.7% of total open interest, down from -14.4% last week.

The Large contract (e.g. SP) professionals are still more bearish that the Mini (e.g. ES) contract Professionals with the difference standing at -14.4% (red line above).

Commitment of Traders: Oscillator -42

The Commitment of Traders Oscillator has now crossed the zero line and this week the reading is -42. This allows us to back-calculate the highest point of the last upswing – marked with a red ShowMe dot.

This week's Emini action will probably be volatile:

• Professionals are heavily Short
• We're re-testing recent highs towards 1,100
• Low volume up bars on Friday show weak buying
• No Demand and Stopping Volume patterns on the 81 minute chart
• Emini being gapped up in Monday's pre-open

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +32.3% (long) and Oscillator -40

Professionals maintained their Long positions on the US Dollar this week. The net Long position reading is +32.3% of total open interest. The US Dollar Commitment of Traders Oscillator is now at -40 (ignore the +23 reading on the chart, I was slow to capture the chart image and it includes Monday's trade data).

I still think we're seeing a gradual change in theme from equities, gold, commodities and emerging markets (risk/carry trade) to US Dollar, cash and bonds. The US Dollar index may be starting to see a rounded saucer forming with declining downward momentum.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

Commitment of Traders: Professionals -14.4% (short)

Professionals continue to add to their Short positions. This week the Commitment of Traders reading is -14.4% of total open interest, down from -13.6% last week.

The Large contract (e.g. SP) professionals are still more bearish that the Mini (e.g. ES) contract Professionals with the difference standing at -14.7% (red line above).

Commitment of Traders: Oscillator +117

The Commitment of Traders Oscillator rolled over last week and this week the reading is +117. We were looking for weakness, such as as break below the previous week's low, which we got this week.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +36.3% (long) and Oscillator -78

Professionals maintained their Long positions on the US Dollar this week. The net Long position reading is +36.3% of total open interest. The US Dollar Commitment of Traders Oscillator is now at -78 and so back in the buy zone.

I still think we're seeing a gradual change in theme from equities, gold, commodities and emerging markets (risk/carry trade) to US Dollar, cash and bonds. But the large volume in the Emini on Friday shows the rally may still have legs.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.

Commitment of Traders: Professionals -14.3% (short)

Professionals continue to add to their Short positions. This week the Commitment of Traders reading is -14.3% of total open interest, down from -13.3% last week.

The Large contract (e.g. SP) professionals are still more bearish that the Mini (e.g. ES) contract Professionals with the difference standing at -13.8% (red line above).

We're starting to see profit taking by Professionals in the intra-day charts and they are using any strength in the market to add to their Short positions.

Commitment of Traders: Oscillator +145

The Commitment of Traders Oscillator kicked back up again this week from +129 to +145. Still waiting for weakness to appear on the weekly charts, such as a break of the previous week's low.

US Dollar Index: Commitment of Traders

US Dollar Index: Professionals +32.4% (long) and Oscillator +60

Professionals added a little to their Long positions on the US Dollar this week. The net Long position reading is +32.4% of total open interest, up from +30.7% last week.

The US Dollar Commitment of Traders Oscillator is now at +60. I'm not happy with this "inversion" – we should be seeing US Dollar strength as the Oscillator crosses the zero line. We could see further weakness in the US Dollar before the Oscillator moves back into over-sold territory. We'll have to wait and see.

Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.