Rising Oil and Treasury Yields Put Stock Market Resilience to the Test

Stocks are under pressure this morning, with S&P 500 Index (SPX) futures down about one-third of 1% as higher oil prices and rising interest rates weigh on the market. The bigger issue is whether stocks can remain resilient if the U.S. 10 Year Treasury Yield (US10Y) keeps climbing and inflation concerns continue to build.

Renewed military activity in the Middle East is helping push Crude Oil Futures (CL) higher, with oil up almost 3%. But despite that move, oil has not confirmed a technical breakout. Price is testing the upper resistance line of a wedge, and $86 per barrel is the important level. A close above $86 still needs confirmation before I would consider it a larger breakout. Without that confirmation, oil could continue moving between roughly $75 and $85 through the midterms.

Oil matters because higher energy costs can eventually work through gasoline, transportation, manufacturing, electricity, and supply chains. If that keeps inflation elevated, it puts additional pressure on interest rates.

That brings us directly to the U.S. 10 Year Treasury Yield, which is now above 4.7% and at a new 52-week high. The last time yields were higher was January 2025. The next major level is 4.8%. If 4.8% breaks, 5% comes into play, which would take us back toward the October 2023 high.

For me, that is one of the biggest risks facing stocks. Strong earnings and massive artificial intelligence spending can support the market, but if rates keep rising, eventually higher financing costs and tighter financial conditions become difficult to ignore.

The Federal Reserve is also part of this equation. The FedWatch tool is pricing more than a 60% probability of a rate hike on September 16. But Friday's jobs report could change that quickly. Even a somewhat weaker employment number could significantly reduce those expectations.

The U.S. Dollar Index (DXY) surged Friday after the more hawkish Federal Reserve message, but it is pulling back again. Technically, the dollar is moving toward a trend line that used to be support and is now resistance. If the dollar reaches that area and gets rejected, the broader technical structure still favors weakness.

Despite all of this, the S&P 500 Index remains surprisingly resilient. The index is still inside a large megaphone pattern and remains well above major support. The broader trend is still higher, so the bias remains neutral to positive for now.

If the upper trend line breaks, 8,200 becomes the major upside level. If that breakout happens within the next few weeks to a month, 8,200 could be achievable by the end of the year. The bigger concern would be a break of the lower trend line because that could open the door to a major 20% correction.

In commodities, Gold Futures (GC) have pulled back into their first important support at $4,400. If $4,400 holds, buyers still have control of that area. If it breaks, the next support is around $4,330, followed by approximately $4,150.

Silver Futures (SI) reached resistance, pushed higher briefly, and then reversed. Natural Gas Futures (NG) look more constructive. Natural gas has broken above an important trend line and is consolidating into what could become a bull flag, while seasonal heating demand is also beginning to matter.

In technology, NVIDIA Corporation (NVDA) remains one of the stocks I am watching most closely. The company reported strong earnings, backlog, and projections, but Friday's reversal gave back a majority of those gains. That tells us the market is still questioning how much of the projected demand will ultimately materialize.

There is also concern around circular financing, where NVIDIA provides capital to companies that then use that capital to purchase NVIDIA chips. Technically, NVIDIA remains between two rising trend lines. The lower line can still act as support, but if it breaks, the stock could begin a larger move lower toward an existing gap and previous pivot area.

Utilities are also getting hit hard. PG&E Corporation (PCG) and Edison International (EIX) are under pressure following new California legislation that limits how much utilities can pass higher costs on to consumers and requires certain payouts to be made sooner.

PG&E Corporation is approaching $13. If $13 breaks, the next technical level is $1250. Edison International has an initial area around $5576, then $52, with stronger double bottom support near $48.

Bitcoin (BTC) is also at an important point. Since Friday's reversal, Bitcoin has moved mostly sideways through Saturday, Sunday, and Monday. That is creating the early structure of a possible bear flag, although it has not confirmed yet.

If Bitcoin starts rolling over, $67,000 becomes the major level to watch. That was an important breakout area where momentum accelerated sharply, so a return toward $67,000 would put Bitcoin back into a technically significant zone and could create a major buying opportunity and bounce candidate.

Right now, the market is still holding together, but rates are becoming harder to ignore. With oil testing $86, the U.S. 10 Year Treasury Yield pushing above 4.7%, the S&P 500 Index still near its highs, and Bitcoin potentially developing a bearish continuation pattern, this is a market where patience and price discipline matter more than chasing the first move.