The only reason (new home) sales were higher, as Northern Trust's gimlet-eyed Asha Bangalore points out, is that there were ponderable downward revisions to the previous estimates of new home sales in May, June and July. If the original estimates for July were unrevised, August would have shown a decline of 2.1%, instead of a rise of 4.1%.

Asha goes on to remind that new home sales are known for large revisions. And so, she suggests, a much more reliable alternative is the three-month moving average, which, as it happens, came to 1.05 million new homes sold, the lowest since May of ' 03. Using that three-month average, sales of new homes are down a whopping 19.4% from a year ago.

Meanwhile, inventories continue to swell; at last count, there was a 6.6-month supply of unsold new houses, up from 4.7 months at the end of August '05. Prices, for their part, continue to do what the smart money said they never could -- go down.

Simply put, cancellations are rising, and they aren't being captured in the aggregate statistics because of the way the survey is designed. Hence, sales are being overstated and inventories understated.

Here is the Dow Industrials with all three groups of traders as classified by the CFTC. What is important to note here is the level of net percent holdings by group. Commercials: 38.2% net short, Non-Commercial (Large Traders): 8% net long, Non-reportable (Small Traders) 30.2 % net long.

What does this mean? It means the least knowledgeable, least capitalized group of traders is holding the greatest OI (open interest, in this case long positions) against (betting against that is) the most knowledgeable, most heavily capitalized traders. Normally Large traders (hedge funds and the like) offset Commercials but their net long position is anemic. It might be time to pop the popcorn, pull up a chair and watch how this turns out or position oneself to take advantage of the rout should it occur.