A year end rally is all depended on the EU. Either, a REAL mechanism of stability is introduced or a cluster fuck of bank runs will take place (and my concerns of the 'coming nationalizations' post will be real).
Over the last two days I was short the SPY. I covered today because we are testing the 320SMA support, and chatter that the ECB may lend to the IMF to provide stability.
I really like the idea of the ECB funding the IMF because the IMF is the austerity enforcer. The countries are getting their houses in order, they just need time for these changes to take place. Hence the importance of the stability mechanism. (IMO, this action may decouple the Euro with the markets and allow for the Euro to decline and the markets to rise.)
If we get a stability mechanism, Fed President Bullard opinion that the EU situation will not affect America as much as people think becomes very valid.
So, we get stability from Europe, we get a year end rally. No stability, no rally.
As for me, I covered my SPY short, and a want for stability.
With the breach of the 360SMA, I added SPY put protection (Jan 125 strike).