Over the past two years, each major correction the market has had was directly attributed to Europe. The PIGS debt first started to stink up markets between May-Sept 2010. Shit really hit the fan in August 2011. (The correction was exaggerated by the SP's US debt down grade.) Each major correction showing a 'end-of-world' type spikes in the VIX.
While bonds have risen in Europe, bonds were also rising in the US. In fact, up until April 9th, global yields were rising together.
ten year yield diverged on April 9th because of the poor April 6th job report. Since then, the yield has not recovered, but we have also seen slightly higher-than-expected jobless claims.
Before the real EU bank runs were taking place, the 10yr was yielding 3%. Yet, with all the EU progress, it is still trading at levels prior to any progress. Despite a potential breakout in mid March, US jobs numbers destroyed the breakout. (IMO, the above is also evidence that US job creation is now a leading indicator.)
Since the breakdown in the treasury, equity markets have seen a fairly significant multiple contraction. (Thanks to better than expected earnings and heavy sell-the-news declines in equities.)
The semi action would suggest continued weakness in the SP500. The semis have not acted as a leader since Oct 2011, and the SP500 is in a better technical set up, none-the-less the Semis do suggest weakness.
After the 1340 level, the market gets dicey. There is a lot of empty space to fill.
1. US slowdown due to weak job numbers.
2. A systemic risk arises again, where ever the rumor mill wants it to arise. (Although many want to use Europe and all its obvious reasons, the above does not suggest it to be the reason. At least not yet anyway.)
The weakness in the treasury seems to be from US jobs data. Given the recent strength from US economic data, I would like to give the April 6th report the benefit of the doubt. But until there is a pick up in the jobs data, the treasury yield will remain low, which will justify a lower market multiple.
I have been currently playing the weak April 6th jobs data as a blimp, actively hedging but not shy about picking up perceived opportunities (like GOOG, IBM, QCOM etc).