Last Line of Support for Bonds and Stocks Approaching

The lower line on NQ is there because the prior rally stalled around that level. The upper horizontal is from March 2021. The bombay doors are open below 12100 with only the prior low as support. I wouldn't press shorts in the short-term though because the market has been trending lower for days. Squeezes are always a problem for bears. I have most of my puts on from two weeks ago or earlier.

My post yesterday about Bonds Getting Ugly Again was well timed. ZB tanked when futures opened at 6 PM and then tanked again this morning. Perhaps the market is front-running the jobs number?

Bonds are very important here. That failing inverse H&S pattern, that rolling over move, is what was seen throughout the first half of the year in stocks and bonds. If bonds break lower, then selling from the first half will quickly resume. The more the market slides every day with no bounce, the more likely a short-squeeze or a "crash" is coming. Either the lows bring in dip buyers who squeeze heavily shorted securities or the breaking of lows triggers brings in new sellers with speculators arleady loaded with shorts. The fastest drops occur when markets go bidless.

The U.S. dollar is already at new highs versus JPY and KRW, threatening new highs vs the euro and yuan. As I said when discussing bonds yesterday, these moments are often when trends fail because continuing them causes major phase shifts. If the dollar goes higher from here, an entirely new leg of dollar strength could unfold. Stocks take out the lows, bonds take out their lows. I do not expect this will be orderly as it was from January to June, but resemble something more like a panic or multi-week crash.

Possible scenarios:

1. Dollar soars, stocks collapse, bonds could trigger a crash if they also sell-off and fuel explosive up and down moves in DXY and stocks/commodities, respectively. Or bonds could flip back as commodities plunge. Something major might blow up, like the Chinese yuan suddenly depreciates.

2. Dollar reverses, stocks collapse, bonds crash as Fed accelerates hikes amid soaring commodities, crashing dollar and soaring inflation. (Inflationistas win!)

3. Weaker economy triggers bond rally, inflation fears fade, stocks squeezed as less bearish picture emerges and economy not weak enough (yet?) to warrant selling on recession fears. A resumption of the rally that started in June.