It appears the year end rally might finally be under way. While we have seen many false starts in the past week, the underlying conditions for a rally have improved. For starters we are finally oversold. We could get more oversold in the next couple of days but I don't believe we would undercut yesterday's lows by much as time is running out.
Looking at yesterday's put/call ratios and Rydex data one does not see much fear. Anecdotally, I saw widespread fear and despair late yesterday. Normally, I would tilt towards going with the the numbers, but the level of disgust I saw late yesterday with the market was so high that in this case I am trusting my instinct.
To summarize, sentiment is negative, the market is just about oversold and seasonality is positive. I think I am starting to see Santa Claus on the horizon, although he looks a little thinned out due to the austerity program the ECB forced upon him.