The most important thing to know about Friday's action is that it isn't very significant. It is nice that the mood has been upbeat and that the market is carrying a positive bias, but the price action has little to do with the things that usually matter, such as macroeconomics or even fundamentals. The market is just being pushed around by traders who are trying to take advantage of positive sentiment and light volume. On Monday it will be back to business, and the action is apt to be much more mixed.
The bearish technicians are going to be talking quite a bit about how this week's oversold bounce has now run its course. We're seeing a classic move into resistance on declining volume, and you can bet that there will be plenty of bears wagering that the market will roll back over.
While the technical argument isn't at all hard to see, the bulls will be focusing on the potential resolution of the "fiscal cliff" issue. That is potentially the biggest market driver out there, but you have to be a real optimist to believe the politicians will reach an agreement without first going through a pretty nasty battle. I expect a resolution, but I don't anticipate it will occur until the deadline is very close.
Hopefully we'll see enough volume and volatility in the market to provide us with some interesting trading. I'm going to stay very flexible and open-minded, and will keep digging for opportunities. Regardless of how the political issues play out, we should be able to bank some profits.
Enjoy the holiday weekend, and get that shopping done early. I'll see you Monday.