February 18th Market Update – Wrapping our minds around potentially explosive dovish monetary policy

I have uploaded a February 18th Market Update. Click here to go to the show archives page to listen or you can listen on the link below.

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-Trump folds on the wall and spending, and the U.S./China outlook ostensibly brightens. All the government officials are saying market supportive things. I just observe how they are all speaking with one mind. Their intention to support asset prices is remarkable.
-The RBA discusses dovishness. The PBOC is injecting massive liquidity and undertaking their own unconventional policy.
The Fed adds to its balance sheet last week. That is truly dovish.
-If things roll over and the Fed begins to add in earnest, and the other central banks like the ECB and PBOC add to assets and inject unprecedented liquidity, the Dow could blow through 30k.
-AMZN still looks poor. Is something wrong with them?
-In order for that to happen, the total balance sheet level would have to move from $20 trillion to about $25-27 trillion
-All the ingredients for unconventional policy formation are present; low inflation (despite strong employment), low interest rates, and weak economic growth worldwide are all prerequisites for the promulgation of hyper-growth in the central banks’ balance sheets.
-The relatively strong U.S. economy is what is keeping the ECB from resuming further easing. If they eased now the euro would sink into the abyss.
-If dovish policy grows, look for residential real estate prices to further disconnect from economic fundamentals.
The 10-year UST futures COT is pointing to a floor in yields here and a resistance in UST prices. This is shorter-term and not a change in the secular trend.
-Gold looks good, according to the latest COT report. Silver and Pl need to catch up. If we test 1,362 again, we should take it out. This price has been longer-term resistance over the past few years. Once in 2016 and again last year. If we take it out on close, 1,400 could be in the cards.
-Keep in mind that oil and gold have been doing well despite a very strong dollar.
-Oil has responded well and is up against the 100-day mva.