Will It Continue Next Week?

The most impressive thing about the action today was that we managed to ignore some very poor retail sales news. We even managed another final-hour spike. When we didn't fade going into the end of the day, the shorts were squeezed, and we ended at the highs of the day.

A strong finish is always a good sign, but if you want to find something negative about the action, the very low volume is a perfect candidate. That is to be expected on a summer Friday, but it diminishes the momentum and makes it more difficult to trust.

I believe we have a fairly good shot at hitting 1105 or so on the S&P 500, but then some very stiff overhead resistance is going to kick in at the 200-day simple moving average, and I'll be looking for the bears to be more aggressive.

Betting against V-shaped recoveries in this market has not been a smart bet until this past month, but it has worked almost perfectly at key resistance levels recently. We have had a major change with the news flow being much more negative, and I don't expect it to suddenly improve. Not only have recent jobs and retail sales numbers been disappointing, European debt problems are far from being resolved, and of course the Gulf of Mexico oil spill will continue to dominate the headlines for quite a while.

Will this upside continue next week? Don't know. I want to stay flexible and opportunistic and at the moment that seems to favor the long side. Just keep in mind that the obstacles to the upside are significant and unlikely to be overcome quickly or easily.