What a ridiculously precarious place for the market to enter into the New Year.  At a close of 1263.02, the S&P sits just 4 points above the 200 day moving average.  Call it hocus pocus, but many traders look at the 200 day as the dividing line between a bull and a bear.  For better or worse, we had better pay attention to it as well:

Low holiday trading volume gives the recent price action above the 200 day moving average little conviction so we will most likely have to wait until the new year to see which direction she really wants to go.

Aside from the neverending concerns over the Eurozone, one market factor that I find extremely troubling is the yield on the 30 year treasury.  At 2.89% we are a mere 39bps away from the 2008 lows.  In addition, the trading range below 3.5% lasted only about 2 months in duration whereas the current treasury malaise has been 4 month so far.  CPI has been running over 3%, so why would you be willing to lock in a treasury yield at 2.9% for 30 years?

Expectations of prolonged deflationary environment, prolonged global fear and flight to the dollar(amusing still), reaching for yield by investing further out on the yield curve, artificially low rates because of quantitative easing?

Turning Japanese again

If you believe that the 30 year yield deserves to be here, then you probably should not believe that the S&P will break strongly above the 200 day moving average.  I would like to think that the 30 year yield is much too low, but with the bonds stubbornly trading around 3% for over 4 months, it has been very difficult to suggest that this range is a temporary blip.

One expectation that I do have is that a move above or below the 200 day moving average will be anything but calm and orderly.