Europe Could Create a Sell-the-News Wave

NEW YORK ( TheStreet) -- This week promises to bring a crescendo to the long-expected eurozone actions. The suspense has been building up for about a month, hard to miss unless you had been on vacation the whole time.

European Central Bank President Mario Draghi is expected to at least give some concrete guidance as to what the action may or may not be on Thursday, though undoubtedly most of the details would need to be worked out later. It is expected to include buying eurozone sovereign bonds of three years or shorter, as reported by Bloomberg. And, I wouldn't be surprised if they also decide to lower the 0.75% rate, given the recent dismal PMI numbers (all over the world, but especially eurozone and China).

Such is the baseline expectation; anything more would be a risk-on surprise and anything less a risk-off kick in the head. As all risks today have become policy risks everywhere, risk-neutral is an impossibility. Governments around the world have literally driven the market into schizophrenia.

But things are more complicated than this, as everything in eurozone. While German Chancellor Angela Merkel has adopted a more accommodative posture toward ECB lately, the split in her government has boiled to the surface. Bundersbank chief Jens Weidmann apparently got a boost, after rumor surfaced last week about his resignation following his public opposition to the bond-buying idea, when the economy minister Philipp Roesler publically joined him, as reported by Reuters.

So, even if Merkel could "muddle through," to paraphrase her recent speech, the Draghi announcement, we can expect much resistance from Germans as they get down to pesky little details such as how much, what to buy, how to set up the triggers, who is to say whether such actions constitute "financing states", where the money will come from, etc., etc.

In the meanwhile, Spain is still bluffing, holding off the application for rescue until the very last minute. It has become increasingly clear that rescuees have nothing to lose by standing firm or ignoring deadline after solemnly drawn deadline, essentially hijacking euro as a bargaining chip. But it's a risky gamble.

While Spain is much more TBTF than Greece, the burden on Germany is also proportionally greater. It could very well embolden the German opposition, and/or force Merkel's increasingly fractured coalition to shift toward the hawks. Since the risks in Spain are well known, such bluffing is self-serving in its narrowest sense and I suspect this will not bode well with other eurozone members.

To summarize, if the Draghi announcement disappoints, it'd be full-throttle risk-off. Even if it's positive, reality will set in after the initial euphoria fades. It's rational to get cold feet on Wednesday.

The "long stocks, long gold, long euro, short USD" trade has become so crowded it makes me nervous. So, if you haven't gotten the memo yet, I would not suggest chasing now; if you're lucky enough to be sitting on some profit, it might be a good idea to take some chips off the table.

At the time of publication, the author was long gold.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.