Vanilla XJO Thread, page-40

Dow Jones -1.83%. SP500 -1.54%. Nasdaq -1.63%. Small Caps -2.05%. Banks -2.7%

Dow Jones.

Dow Jones has broken below the lower edge of its recent consolidation zone.

The break lower sets the scene for a "false break".

This move lower would have taken out a lot of "sell stops" putting many traders into short positions.

We now have the potential for institutional traders to buy into the market and send it back into the consolidation and setting off a "short squeeze".

Monday's action will be a decider.

Technically, the positive divergences seen on some of the indicators supports the case for a short squeeze scenario.

The general consensus among "pundits" is that last night's action was bearish - and expect more of the same. I'm always looking to be contrarian - going against the grain of general consensus. That's key to understanding my take on markets. A good dose of salts needs to be taken with anything I have to say. If you like consensus - then I'll give you that - bearish.

Commodities.

Commodities Index +2.69%. Energy +4.02%. Base Metals +0.97%. Agriculture +0.34%. Gold +0.96%.

Very odd action in commodities, e.g., Gold rose while U.S. dollar rose. Why? Haven't a clue. But here are a couple of ideas which might or not be right: increased sanctions against Russian Oil, increasing fear of inflation. (Add anything you like to these couple of ideas - they'll be just as good - or not.)

Yesterday in Australia.

XJO down moderately on Friday -0.42%.

After two negative days the bias is to the downside.

A large "fair value gap" is marked on the chart - that's a zone of disequilibrium when a strong market rises quickly.

I'm expecting a dip back into that FVG so that equilibrium is restored and the market can move higher again. That squares with my contrarian view on the U.S. Dow Jones.

Take care.