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From the WSJ:

Stocks were unable to hold onto Tuesday’s 400-plus point rally in the Dow industrials and attendant rallies in other indexes, and steadily marched lower through the afternoon, until news of a lawsuit filed by Merrill Lynch against a unit of bond insurer Security Capital Assurance, alleging the company is trying to avoid obligations of up to $3.1 billion under seven credit default swaps. Merrill’s own CDS widened on the news, moving to 250 basis points from 210 basis points, according to Phoenix Partners Group, and the stock market dove, with the Dow giving back a good lot of the previous day’s massive rally.

 I stated several times in the comments that the CDS market may very well lead us into the next serious leg down. Many of the guys who wrote these either don't have the cash to pay up or are wrapped up in hedges using CDS which will easily get @#$@ed up once one leg of the hedge falls.