A 10 percent decline in Apple is arguably a bigger market event than a 10 percent decline in the S&P 500.
The ECB and the EU are now at the point where they are going to have to execute on several fronts. They need to:
1) articulate the terms under which they will provide aid to Spain and Italy,
2) activate the European Financial Stability Facility (EFSF) (what's this?) and ESM rescue mechanism, articulate under what conditions that fund will buy bonds;
3) articulate how the ECB bond buying program (the Securities Market Program (SMP)), will work and whether or not purchases made by the ECB will be sterilized;
4) disperse capital to Spain's banks from the $100 billion euro bank rescue package, and
5) lay out a clearer strategy toward fiscal union and a pan-European banking union.
It's been going well so far. Draghi and Monti appear to be getting buy-in from Angela Merkel on using the EFSF/ESM for buying sovereign debt, despite the opposition of the Bundesbank. Splitting the Germans is a major victory. (Read more: Your Euro Play on Jackson Hole)
But there are big problems. The Spaniards — and the Italians — are going to balk at "conditionality." They are going to fight and attempt from Brussels/Frankfurt to have oversight of their national budget. That, you will recall, was one of the points Mario Draghi said was necessary in his "Die Welt" editorial yesterday.
Major fight here, but remember Ireland, Portugal and Greece already have submitted to this "conditionality."
That's why it's possible the bond buying program begins in Portugal or Ireland, rather than Spain. Then Spain comes in down the road, providing a deal can be reached.
There's much that has not been resolved with this bond-buying program:
1) it's not clear what is meant by "bond buying." What bonds? Short term or long term? Five years? Draghi has hinted the buying would be at the short end. One thing's for sure: just buying all the 10-year Spanish bonds that come to them will take the pressure off Spain to do anything, even with conditionality.
2) They are going to have to address the issue of seniority if the bond buying program goes forward. Private investors cannot be viewed as subordinate to the EFSF/ESM. Draghi has already hinted private investors would be on an equal footing with government investors.
3) how much they will buy? If it's unlimited, well, that is the bazooka the market has been looking for.
4) is there a yield cap?
There is a Summit of European leaders on October 18-19. Much of the details of the bond buying program will likely be in place by then. We will be blown around by headlines in between, as we were today.
—By CNBC’s Bob Pisani
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