On Friday, positive European headlines drove the S&P 500 up 2.5% for its best day of the year. A two-day summit of Europe’s leaders resulted in an agreement for a single supervisor of eurozone banks, and the zone’s bailout funds should be able to directly boost the capital of banks, like Spain’s banks, without taking on more sovereign debt.

Both European and Asian stocks rallied on the news, and the Dow Jones Industrial Average jumped 278 points, closing at 12,880, the S&P 500 soared 33 points to 1,362, and the Nasdaq popped 86 points to close at 2,935. The NYSE traded 1.1 billion shares and the Nasdaq crossed 592 million. Advancers were ahead of decliners on the Big Board by 6.2-to-1 and by 5.8-to-1 on the Nasdaq.

For the week the DJIA gained 1.9%, the S&P 500 was up 2% and the Nasdaq rose 1.5%. For the quarter, the DJIA was off 2.5%, the S&P 500 lost 3.3% and the Nasdaq fell 4.6%.

Friday’s impressive rally popped the 500’s daily bar through the 50-day moving average and the resistance at the April low of 1,357. But it failed to close above the June high of 1,364 and the 50-day moving average has not yet hooked up; the absence of those small details could be a negative sign. Also, I’d like to see the RSI break through the trend line with the June high at 59.97; it currently is at 59.13.

Support currently rests at the upward slanting trendline at 1,312 and the 200-day moving average at 1,298. A break above 1,364 could result in a charge to 1,400-plus, but a break below 1,312 could turn into a test of the 200-day moving average.

Friday’s big day for the bulls resulted from more favorable news from Europe and Asia, where rumors are flying of a cut in interest rates. Thus, an examination of the Vanguard FTSE All-World ex-US ETF (NYSE:VEU), which charts the performance of developed and emerging markets outside the U.S., should be helpful to our analysis. This is a volatile index, and so Friday’s big gap up that jumped above the 50-day moving average is not that unusual. An examination of the chart reveals many such gaps both up and down. The index still is below its 200-day moving average and the apex of a right triangle that intersects at about 42. Note the downward-sloping 50-day moving average and the approaching top on the RSI.

Conclusion: The bulls were whooping it up on Friday, but they are far from out of the woods. The resistance at 1,357 to 1,364 is important because this is the zone that broke and produced the nasty May decline, then turned aside the advance in mid-June. The bulls should be able to penetrate this zone, especially with a new quarter beginning, accompanied by its typical inflow of new cash.

Before jumping for a ride on the bull, I’d like to see him charge ahead. I’d hate to discover that I was riding a bear in a bull skin.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.