Finally, Germany cedes a little, and markets go crazy. European leaders agreed to take steps toward closer budgetary controls and tighter political union. Moreover, in a victory for Europe's Latin Bloc, German Chancellor Angela Merkel opened to using bailout funds to directly recapitalize banks and to purchase sovereign bonds in the open market.

This is huge step forward, and markets are responding accordingly. By all indications, the gains are just getting started ahead of what could be a multimonth advance before worries over America's "fiscal cliff" -- tax hikes and spending cuts worth about 5% of GDP due to hit in early 2013 -- cause new weakness. Here's how to play it.

As I previewed in my column this week, Merkel realized that her constant recalcitrance against any fresh steps to ease the eurozone crisis (moves toward liability sharing via Eurobonds or a banking union) was quickly spiraling out of control. Spanish and Italian borrowing costs were reaching unsustainable levels. And political cohesion was beginning to fray, with Spanish and Italian leaders threatening to veto a new $150 billion growth package if there was a lack of progress on these issues.

So the outcome from the summit -- which was the 19th meeting in two years -- was very, very good. This follows a good outcome from the Greek election and fresh stimulus measures by the European Central Bank (relaxation of collateral requirements).

With investor sentiment so negative heading into this meeting, people have been taken by surprise. Friday's market action demonstrated this with huge, gapped moves higher in key assets. Small caps. Emerging-market stocks. Crude oil. Copper. Precious metals. They all moved by leaps and bounds.

Technically, it's all systems go for a fast-moving rally led by foreign stocks, financial issues and commodities. Breadth has been improving steadily as more and more stocks participate in the upside while fewer and fewer participate in the declines. Deflationary expectations are easing in the bond market, which is a good thing that will suck money out of Treasury bonds and put it into stocks and gold.

And the dollar -- on which so much of the market moves, as computer-trading algorithms use the euro-dollar exchange rate as a measure of risk appetites -- got absolutely pummeled, resulting in a cascade of short-euro, long-dollar trade covering. For the bears, it's a terrible day.

I'm looking for this advance to continue into August as eurozone progress and central bank stimulus fuel another ride higher, as I discussed in my column last week. 

 
Trading update

The leveraged ETF positions in the Edge Letter Sample Portfolio were well positioned for Friday's rise. Both the Direxion 3x Emerging Markets (EDC) and the Direxion 3x Semiconductor Bull (SOXL) are posting 10% gains. New position Synovus Financial (SNV) is also doing well, up 6% since I added it on Wednesday.

I'm adding two new positions to my portfolio, European lender Banco Santander (SAN) and Indian metals miner Sterlite Industries (SLT).

I found both SAN and SLT with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)

Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at anthony@edgeletter.c​​om and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.