With the U.S. dollar surging even higher after yesterday's move by the ECB to inject $1.3 trillion into Europe's bank and bond markets, below is a key piece that warns currency wars are now heating up as the CRB falls to a level not seen since 2009.

By Art Cashin Director of Floor Operations at UBS 

January 23 (King World News) – In mid-morning, after the Danish central bank surprised with a rate cut, I sent the following note to some friends:

Denmark cuts again.  On the face of it, obviously a response to new, and assumed further, weakness of the Euro.  Nevertheless, it conveys an aura of central banks' jitteriness – especially on the back of the surprise Bank of Canada move.  Currency wars may be heating up.

Once Europe closes, U.S. equities may shift focus back to crude market.  A drop in WTI below $46.50 may catch attention.

With six central banks having changed rates in the last week and a half, it appeared evident there was a pronounced edginess apparent in the world of central banking.

The concern about the accelerated activity among central banks had to do with transition.  Currency wars begin rather cerebrally, somewhat like a chess game.  As the wars intensify and pain and fear begin to spread, activity and intensity begin to accelerate.  That's why traders put their antennae on alert.

After Europe closed, the stock market looked like it was going to follow the traders' presumption to a tee.  Prices began to fade right on target.

The market followed the template for a whopping 13 minutes and then the easing stopped dead.  Stocks began to churn sideways as they would continue to do for the next two hours. 

Shortly after noon, I acknowledged that change in a follow-up:

The possible pullback post-Europe appears to be postponed. Whipsaw trading has swollen volume a bit with the run rate at 12:15 projecting an NYSE final volume of 800/880 million shares.

(The final NYSE volume was 889 million shares, thanks in part to a sharp late day rally.)

Around 2:30, after churning sideways since noon, the Dow punched above its prior high for the day, which had occurred before Europe closed.  It was as if someone flipped a switch.  Electronic buy orders poured onto the floor.

The reaction was so instantaneous that traders assumed that some algorithms had been set to monitor that particular level. The presumption was that a move above would trigger buying or a stall (double top?) would trigger selling.

As stocks moved higher, they appeared to trigger other technical targets, further expanding the buying and giving the rally a kind of internal momentum.

While the action in the stock market was broad and convincing, there were a couple of curious anomalies in other asset classes.

While yields in Europe moved lower on the QE move, rates here in the U.S. actually rose.

Also, given that the QE program was supposed to boost inflation a bit, the CRB index continued to slip, falling to a level not seen since 2009.

One of these things is not like the other.

Consensus – This weekend brings the Greek election and transfer of power in Saudi Arabia.  The latter has put a mild bid under Brent.

Bulls would like to consolidate yesterday's gains.  Otherwise, traders will look for further fallout from the ECB move.  Stay wary, alert, and very, very nimble.  Have a wonderful weekend. ***ALSO JUST RELEASED: Legendary Richard Russell Predicts Within A Year All Physical Gold Will Be Swept Off The Market CLICK HERE.

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