As companies begin to report second-quarter earnings results, falling oil and the strengthening dollar could spell trouble for earnings season.
"[It's] not a rosy picture," Gina Sanchez of Chantico Global said Thursday on CNBC's "Trading Nation." "We're going to see more drag on S&P earnings."
According to RBC Capital Markets, a 10 percent increase in the dollar equates to a 1 percent drag on S&P 500 earnings, while a 10 percent increase in oil results in a 1 percent boost.
In a Thursday RBC report, chief U.S. strategist Jonathan Golub wrote that with oil down 44 percent and the dollar up 18 percent, S&P earnings will likely see a combined drag of 6.2 percent this quarter.
A stronger dollar means more expensive U.S. exports for other countries, as well as cheaper U.S. imports compared to domestically produced products. In a Friday blog post, the New York Federal Reserve said the strengthened dollar could result in a GDP cut of more than 0.5 percent.
Read MoreUS GDP cut 0.5 percent by 10% dollar rise: NY Fed
Meanwhile, lower oil prices have weighed on energy company stocks, which constitute about 8 percent of the S&P. The energy sector is the worst-performing S&P sector of this year, down more than 9 percent.
Although cheaper oil could mean more consumer spending in other sectors, Sanchez said disappointing June retail sales numbers, released Tuesday, show that this isn't the case.
"The dollar is going to be a bigger drag than oil will be a big help," she said.
But as the S&P continues to climb higher, one technician sees the benefits of lower oil prices winning out.
"The S&P 500 is once again within shouting distance of its highs for this year," technical analyst Rich Ross of Evercore ISI said Thursday on CNBC's "Trading Nation." "If the S&P keeps acting like the S&P's been acting this week, I like what I see."
Despite pressure in energy markets, other sectors of the S&P are now breaking out, Ross said, which indicates strength in the broader market.
"The dynamics are changing. What we see is there's a lag effect between the benefits from lower crude prices and that's filtering into the economy," he said. "Energy, industrials, transports, materials, they're negatively impacted by that lower crude price. But we're also seeing strength in technology, health care, discretionary and now financials."
So far, 54 companies have reported earnings, which are beating expectations by 5.6 percent, according to a report from RBC on Friday.
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