Markets face a difficult task, today: keep the rally alive while interest rates and inflation are making investors very, very nervous.

The interest rate breakout continues, with TNX reaching 29.75 moments ago.  It was enough to get DXY back up to its neckline again — the 5th backtest so far.   Anything higher, though, would be a problem. And, it was almost enough to get ZN to our early downside target. The question over the past several months was how to get ZN and DXY down to support — whether in one fell swoop or drawn out for months — without equities falling apart.

With USDJPY closing in on overhead resistance and EURUSD finding support at its triangle bottom, it’s going to be tricky for stocks to hold these levels, especially if CL and RB take a dive.

AMZN is showing negative divergence with a bearish falling channel in its RSI.And, AAPL is very likely to drop through its 200SMA.Will the bulls pin it on FAANG?  Probably.  FB and NFLX also look vulnerable, here — lending credence to our COMP theory.

continued for members…

Our RB target is definitely aggressive.  But, this is what it would take to get CPI back down to 2% for April.

Note that CL has broken trend.USDJPY should be limited here unless DXY breaks out — which would probably mean TNX reaching levels that are downright uncomfortable.  Feels like coiling to me…Ditto for EURUSD.  The next move looks to be a bounce off the triangle bottom – dollar weakness — up to the .618 Fib.  Since it didn’t happen at the white channel top, the next best opportunity would be the purple channel midline around May 3.  If the timing is off, then the next most likely opportunity would be when the red channel top intersects the .618 around Jun 5.The equity picture… UPDATE:  2:00 PM

Lots of propping up going on today…So far, USDJPY, CL and RB are all involved  in an effort to keep SPX above its SMA10.   VIX potentially has more room to go, but I’d think they’d keep it in reserve.  Bottom line, this is a lot of work to hold the SMA10.  But, I don’t think it’s going to be enough.

I neglected to put dots there, but ES’ SMA200 is at 2606.53 and SPX’s is at 2605.58.  If things get rolling, that would make for a sufficiently scary plunge. AAPL, breaking down…This has the feel of something that could get out of control real quickly…