With the U.S. dollar surging, while gold, silver and crude oil struggle, below is a key piece which highlights an incredibly dangerous development that the Western world is finally beginning to realize it will have to confront, and also warns a wave of fear is spreading as the West prepares to deal with this nightmare.

By Art Cashin Director of Floor Operations at UBS 

March 11 (King World News) – For weeks, I and many others cast doubt on the efficacy of any QE from the ECB.  The problem as we saw it would be the mechanics.  The ECB did not have the kind of huge, singular bond market available to it as did the Fed and the BOJ.

Despite my reservations, the ECB has moved ahead with QE, and, after only a few days, some of the flaws are beginning to show up.

If it follows up on its announced purchases, it will be buying more than half of the issuance of the bonds it targeted.  Further, it appears that its very operation could move some yields to a level that might remove a particular bond as a potential target.

In essence, the ECB may be committed to spend more money on a shrinking number of bonds.  That would be the same as though they doubled the committed purchases of a static amount of bonds.  So, after the first few days, it appears that the ECB may be far more influential than it intended initially in moving rates lower across Europe.

If that is so, even if the Fed were to back off and stand pat, the spread between the two continents would widen as if the Fed had notched up a bit.  Perversely that could lower U.S. treasury yields, while putting more upward pressure on the dollar.

I think that Tuesday evening, there was a "Eureka moment" in the FX markets.  That's what caused Tuesday.

You may have another hypothesis but you must admit that this one fits in with all the results, even the ones that seemed contradictory in other proposals.

Elementary, my dear Watson.

The Siren Call of QE Lures Some Big Names – In case you missed it, here is a little who's who from the WSJ's estimable Kristen Scholar:

Investors seem to be following a simple rule: Buy where there is QE. Hedge fund titans from Stan Druckenmiller to George Soros to David Tepper have been scaling back on their exposure to U.S. stocks and, instead, are putting more money to work overseas. Just last week Mr. Druckenmiller said the majority of his long exposure is in Europe and Japan as both markets are cheaper than the U.S. and should benefit from their own versions of QE.

Overall fund flows show a similar story, implying it might not be just the smart money chasing performance abroad. According to Lipper, U.S. stock funds have seen $5 billion in outflows so far this year, while European equity funds have collected $4 billion in assets and those in Japan have gathered a little over $1 billion in 2015. Returns in 2015 have already paid off for those invested in foreign markets. Across the pond, Europe is higher by 15%, while Japan has risen 8%. At home though, the S&P 500 is up only 1% this year even as the U.S. economy improves and jobs growth is the strongest it’s been in over a decade.

Cocktail Napkin Charting – On any further weakness, traders will look to the 150 day moving average in the S&P (circa 2014/2017).  On a rebound, resistance could show up at 2054/2058.  Oil needs to hold $47.75.

Consensus – If my hypothesis (above) is correct, the continuing thread will be downward pressure on the euro.  Watch the European bond market for signs of possible disruption caused by the frayed mechanics of QE.  Somewhat oversold.  Stay wary, alert and very, very nimble. ***ALSO Legend Who Oversees $170 Billion Issues Dire Warning About Global Financial Markets! CLICK HERE.

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Eric King