ETF SPY: Earnings This Week Will Dictate Direction

RSI-I have written about my observations of negative divergence taking place with the RSI indicator and the MACD indicator for the last three weeks, but now I am noticing consolidation as we have higher lows and lower highs and the stock continues to move up.


so I'm not quite sure how it's going to play out so I intend to watch it. If the stock continues to move up I can understand why because this last move before it had a little backup didn't even hit above the oversold position so it's still has strength.

MACD-The MACD indicator almost looks like it is in a bullish consolidation pattern as it continues have higher lows and lower highs. This is an interesting observation since the RSI indicator is doing the same thing but the stock continues to move up it will be interesting to watch this pattern and see how it plays out.

Bollinger Bands®-It appears that the aggressive bullish move this week has the stock pushing through the upper band and on Friday it finally pulled back a little bit. Being at the top of the band, I wouldn't be surprised if the stock pulled back now but I believe the earnings reports this week may dictate whether the stock continues to move up along the upper band or bounces back to either the middle or lower band.

In Summary-Even though I have written about continued weakness in the move of the S&P 500, I still see strength in this move and I am interested to see how it plays out because the formation and watching is new to me. It looks like the indicators are consolidating with a strong bullish emphasis while stock continues to move up. I'm not sure if this means the stock is going to move sideways for a little bit and then continue up or if it's just going to move sideways and then go down. I will be interested in seeing how this plays out.

Current Events
It has taken less than four months for the S&P to surpass year-end 2013 targets of about two-thirds of the strategists polled by Thomson Reuters in December. Of 47 analysts surveyed, 30 of them expected to see this year end at a level already exceeded by the index.

"The only thing that happens now is do we start to see something in the company earnings reports - these are really important because that is where the rubber meets the road," said Gordon Charlop, managing director at Rosenblatt Securities in New York.

Next week 74 S&P companies are expected to report results, across a wide swath of sectors. Financials dominate the week, including reports from American Express Co (AXP.N), Goldman Sachs (GS.N), Bank of America (BAC.N) and Citigroup Inc (C.N).

Cyprus

In approving a 10 billion euro package, Europeans called on Cyprus to find an additional 6 billion euros to cover what is now a larger funding hole. In other words, it now needs to generate a total of 13 billion euros. This is a huge amount for a country the size of Cyprus, even after it goes after uninsured deposits in local bank accounts.

All this confirms what I argued a week ago - namely, that "anyone even remotely familiar with the details of the Cypriot program realizes that the country is a long way away from what [a Troika official claimed to be] "a durable and fully financed solution," let alone a sustainable path towards recovery."

Despite losing control of both growth and funding dimensions, European officials are yet to find the courage to recognize publicly what must be crystal clear to them in private (and was evident to others a week ago): "Key assumptions of the program are outdated if not totally obsolete."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.