The chart below is a one month chart of Italian bond yields. It does not include today's move up to 6.14%, a new one month high. According to Italian bond yields the crisis is not only not over, but getting worse. From Bloomberg:
It is certainly possible that our markets will ignore Europe as they did for much of the past year, until June. We had a year end rally last year as the situation in Europe worsened. However, it will be more difficult as a recession in Europe is all but guaranteed and the effects will be felt by US businesses.
The excess pessimism that has buffered the market is now gone. The fear of missing out on a rally has replaced the fear of losing money, although we are not yet at extreme optimism. The direction of the market is a difficult call, which is why I have reduced longs into recent strength. I prefer cheap, defensive stocks over the high beta cyclicals that have recently skyrocketed.