Greek Election: The Worst Happened

NEW YORK ( TheStreet) -- Of all the realistically possible outcomes of the Greek election, the worst is more uncertainty, yet not enough risk to provide central banks of the world sufficient cover for coordinated action. This is exactly what just happened.

The pro-euro New Democrat came up on top, with a slight lead over the anti-euro (not really their principle, but this is what matters to the world) Syriza. The moderately pro-euro Pasok came in as a distant third. In theory, the New Democrat and Pasok could form a coalition government. But they just re-affirmed that they won't participate in the coalition unless the Syriza is included. The risk for the no-government scenario, therefore yet another election, has risen.

Whether this is enough to prompt the central banks of the world into coordinated action, as threatened before the weekend, is not certain. My bet is on "no"; even if you don't agree, at least the risk of inaction is much higher than if the Syriza had won.

This leaves us at a worse situation than last Friday, when the worldwide markets were buoyed by the hope for coordinated action of central banks: More uncertainty in Greece, but no central bank action (or at least more uncertainty).

Furthermore, whatever government the Greeks may form, they would feel entitled to ask for renegotiation of the bailout deal due to the Spanish deal. While some eurozone leaders have entertained the possibility, Merkel flatly rejected the idea. With apologies to French pride, the reality is Germans call the shots in the eurozone. How this can be construed as a positive for the market is beyond me.

As of early morning Monday, all equities futures are up in Europe, along with oil ( USO), gold ( GLD) and the euro ( FXE), while the USD ( UUP) is down. In other words, this is considered a risk-on except for gold.

Well, I don't buy it, very much like I didn't buy the Asian/Europe rally last Sunday, June 10, that faded half an hour into U.S. open the next morning. I was very impressed by how quickly the U.S. market faded the false rally. If that insight continues, the U.S. market will prove once again its maturity and dominance Monday.

Similar to last Monday, June 11, if there's a rally at the open, it's probably better faded unless you are very quick. I would once again look to the bond market ( TLT) for more reliable indication or confirmation.

Looking ahead a bit further, the G20 meeting might provide some completely false hope but, as usual, will prove once again to be a complete farce, as always. There seems to be a continued drumbeat on QE3 from the FOMC meeting but I believe it would also turn out to be a disappointment for QE addicts. The outcome of Greek coalition government should be clearer in a few days; otherwise it would mean more uncertainty and the risk of yet another election.

So, a "hopium"-based rally could very well last a few days; but I would be enthusiastically on the short side when disappointment sets in.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, the author was long UUP.