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Market Preview: Reality Check

Tickers in this article: SPY DELL ^DJI FB ^GSPC ^IXIC HPQ

NEW YORK ( TheStreet) -- That oversold bounce didn't last long now, did it?

Tuesday was a fairly ho-hum affair for U.S. stocks. The early strength was mostly based on what wasn't happening scary headlines from Europe than what was a good but not great read on existing home sales in April . So when Lucas Papademos, Greece's former prime minister, reminded Wall Street that the possibility of the country leaving the eurozone was real, the market reacted.

Now it wasn't a deep or disorderly selloff. This wasn't some big revelation. More of a reminder of what's really driving the action these days. In other words, it's prudent not to get too jazzed if the major U.S. equity indices start to claw back some of May's losses unless the impetus is real progress in Europe.

What form "real progress" would take is the best question. The idea of shared debt, eurozone bonds, is starting to get some attention but it's hard to see Germany getting on board with that. We'll know more soon with Europe's leaders set for their latest in a long line of summits on Wednesday but those waiting for definitive action are likely to be disappointed in whatever of platitudes come out of the confab.

Indeed, Credit Suisse offered some observations earlier Tuesday that underline what a big role politics are playing in the markets these days and why that's problematic. The firm held its 2012 Global Macro Investors Conference in New York last week, and came away with this insight.

"Politics was seen as the key element in the European debt crisis," the firm said. "We think this insight holds more generally: whether it is the US fiscal cliff and the required debt ceiling rise in January 2013, the leadership change in China or the Euro, political risks dominate much of the macro analysis. This is why markets trade cheaply. Investors are not political analysts."

Based on its own survey of conference participants, Credit Suisse said 29% of investors expect Greece to exit the eurozone by the end of this year, and that 42% of this group believe Greece's departure would spell the end of the single-currency bloc. The firm, which places a 10% probability on the end of the euro as we know it, also found a few contradictory opinions out there.

"Surprisingly, 29% of investors thought European assets provide the best risk return trade-off over the next decade relative to current expectations, so investors can see opportunities," Credit Suisse wrote. "Yet, nearly everyone is negative on peripheral European debt (88%) and nearly everyone we spoke to was underweight Europe with the hedge funds being almost totally absent (except on the short side)."

There was also a lot of confidence in stocks, just not right now.