Cliff Wachtel's  Instablog

Part 2 : Coming Week Market Movers & How To Profit

The following is a weekly strategy guide for traders and investors, covering coming week’s market movers and how to profit from them for traders of all major asset classes via both traditional instruments and binary options. Perfect for those seeking a summary look at likely coming week market movers and how to play them.

As noted in Part 1, there is increasing belief that a Greek default is becoming unavoidable. Complications are making the July 21 agreement look less and less likely. If this loss of faith hits critical mass, then no leader will want to risk being remembered as the fool who threw more money after a bad cause, and focus will shift from saving Greece to measures to minimize and control the fallout from the default.

We saw the start of such moves this week with announced German preparations to stabilize German banks in the event of a Greek default.

Meanwhile Greece has insisted on higher participation rates in the “voluntary” swaps of longer term debt discussed below, and Finland continues to seek cash collateral that Greece cannot afford to provide, if for no other reason that it would then have to provide similar collateral for a host of other nations. That would in turn consume the very cash Greece needs to survive and undermine the whole purpose of the bailout.

Greece could default in October unless it gets the next tranche of bailout funds. Here are the related events this week that influence  the odds of that happening.

Germany cannot credibly threaten to withhold bailout cash from Greece unless it can at least pretend it’s prepared to endure the consequences. If it can’t, Greece can continue to hold the EU hostage as it points the default-contagion-catalyst gun at the EU’s heart. Thus no surprise Germany is telling about its plan B (no details, of course).

We suspect the positions noted may be more grandstanding for local consumption and negotiating ploys than actual positions on which the bailout could fail.

Why? Simply because at this stage a Greek default still is likely to cause the other GIIPS to be deemed equally bad credit risks and to lose access to credit markets, thus causing  these nations to default. That in turn risks another “Lehman moment,” another global banking  crisis as banks stop lending to each other on fear of which banks may now be a bad credit risk due to direct or indirect exposure to EU banks or US banks that insured GIIPS debt.

Either way, the following events promise enough drama send markets plunging on fear or soaring on euphoria after dodging yet another default bullet.

Of course the real danger with games of chicken is that even though everyone intended to pull back at the last minute something happens and  WHAM,  that last minute suddenly isn’t there, changes occur that require more than a last minute to resolve, or events block you’re planned escape.

What’s the likely winner in either case? See the conclusion below.