Yields Hit 20-Year Highs and Stocks Snap a Three-Week Win Streak: Key SPX Levels to Watch Now

Bond Markets Take Center Stage After a Strong Earnings Run

After a strong earnings season helped lift U.S. equity markets to record highs in August, stocks took a breather last week as the bond market moved to center stage. Rising long-term yields raised concerns about whether the economy and financial markets could continue to withstand higher borrowing costs. The 30-year yield ended the week at 5.27%, near its highest level in almost two decades. The 10-year yield was at 4.73%, with the 2-year yield at 4.23%.

The S&P 500 and the Nasdaq fell around 1% to 2%, snapping a three-week string of gains as an unusually strong quarterly earnings season neared an end. The S&P 500 ended the week 1.6% below the record high it set the previous week, while the Nasdaq was 3.4% shy of the historic peak it reached in early June.

August and September have historically been seasonally weaker months for stocks, and uncertainty could rise as the midterm elections approach. While a period of near-term consolidation would not be surprising, resilient economic activity and strong corporate profit growth underpin a constructive backdrop for equities over the next weeks and months.

Gold, Bitcoin, and Oil All Move Higher

The price of gold climbed for the third week in a row and on Friday reached the highest level in more than three months, with gold futures trading around $4,670 per ounce. As recently as mid-July, the precious metal had been trading under $4,000.

Bitcoin surged to its highest level in three months, trading above $77,400 on Friday afternoon after finishing the previous week around $63,000. Even with the recent gain, Bitcoin was still down more than 11% on a year-to-date basis.

Oil prices rose for the second week in a row, driven largely by developments in the Middle East and the Strait of Hormuz. On Friday afternoon, U.S. crude was trading around $87 per barrel, up from $82 a week earlier. Even with the latest rise, oil prices remained well below a recent peak reached on July 23, when crude briefly traded above $92.

Key SPX Technical Levels to Watch

Support near 7,575-80, 7,450-65, 7,275-90, and 7,313-15. Any severe downside extension could test 7,000 and even an outlier level of 6,750. Technical chart resistance lies near 7,800-7,816 and 7,925-40. A test of 8,000 or even 8,250 on a blow-off move would not surprise us.

In any case, as we always do at TheTechTrader.com, we’ll “Trade What We See, Not What We Think.”

— HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com