Greek elections to keep tensions high on Wall St

Analysts have viewed the Greek election as a potential turning point for Greece,with all eyes on whether voters will favor the leftist Syriza party opposed to the austerity measures that are part and parcel of Greeces international bailout package,or the conservative New Democracy,which is committed to upholding terms of that agreement.

Central banks from major economies are ready to take steps to calm financial markets should the outcome of the Greek elections create a market storm.

One likely outcome of the Greek election is the failure of any party to form a coalition government,said Gregory Peterson,director of investment research at Ballentine Partners in Waltham,Massachusetts.

I think thats a fairly high probability outcome, he said. Its going to leave a lot of heads scratching,and thats probably not going to be good for the market.

A more bearish outcome would be one that presages an unraveling of the euro zone,said Peterson,whose firm starting reducing its exposure to European assets over a year and a half ago.

The rest of the week is not likely to be any quieter. The Federal Reserve is due to release a policy statement on Wednesday at the end of its two-day meeting,and the steady flow of sovereign debt warnings and downgrades is likely to continue.

In yet another sign of investor nervousness,the CBOE Volatility index .VIX,Wall Streets fear gauge,was up for much of Friday,even as stocks rose,although the VIX finally closed lower. Stocks and the VIX typically have an inverse relationship.

Many investors have been trying to prepare for the worst.

People have been hedging their positions aggressively over the past two weeks heading into this weekend, said Alec Levine,a derivatives strategist at Newedge Group in New York.

No matter what happens this week,we will return to a massive game of chicken between the newly elected Greek government,whoever that may be,and the EU,specifically Germany.