VantagePoint AI Market Outlook for the Week of July 13, 2020
Hello everyone. And welcome back. My name is Greg Ferman, and this is the Vantage Point AI Market Outlook for the week of July the 13th, 2020. Now, to get started this week, we’re going to begin with a quick review of our direct intermarket correlations because they are so vital to the success in any market we’re trading, whether it be stocks, futures, commodities, Forex, they’re all bound together. So when we look at this right now, the main driver, the US dollar and the S&P 500 that were formerly correlated, we can assess here using the vantage point, the power of the vantage point software, identifying exactly when these inner market correlations broke down. We can assess that the dollar and the S&P 500 were moving up and down together up until about March the 9th. And this is where the height of the COVID, everything related to the COVID, the lockdown started up.
At that particular time, the dollar and the S&P 500 correlation broke down. We can again, identify this almost to the day that that happened. So we need to understand in our trading right now that if the S&P 500 is going to continue to advance, then the dollar must continue to move lower. And we’ll discuss that more in a minute. But when we look at the S&P 500 and it’s advance, that has put downward pressure on the US dollar, that indirectly puts downward pressure, or … excuse me, upward pressure on Euro/US, Aussie/US, New Zealand/US, all of these different currency pairs and of course, individual stocks are all worked into this same group. So if the S&P 500 is advancing, then chances are the individual stocks will be moving higher also.
Now, as we look at these direct inner market correlations, we absolutely want to look at gold. Gold in the S&P 500 surprisingly have largely been moving up and down together. So again, if the S&P 500 breaks down, can gold continue to advance? At the current time, looking at these two charts, both gold and the S&P 500 are basically very, very close to major resistance levels where they’re starting to stall out. Now, again, we’ve had a very good rally in the S&P 500 and in gold, but nothing goes straight up and nothing goes straight down.
When we look at Bitcoin, for example, Bitcoin, and the S&P 500 is a very, very similar investment. This is something that’s always troubled me about Warren Buffet saying that Bitcoin’s a scam, bitcoin’s not a good investment, yada, yada yada. Well, it’s actually been a fantastic investment over the last two years.
So basically saying that Bitcoin is not a good investment, is like saying the stock market is not a good investment. So again, a little confusing with some of the comments that Buffett has made, but I’ve largely ignored Buffett’s viewpoint on Bitcoin and followed the inner market correlations to decide whether I want to buy a Bitcoin or not. And these chart tells me that, yes, I do want to buy a Bitcoin. It’s been a very good investment. When we quickly look at some of the main currencies that are correlated to the S&P, we can see that that breakdown here between the Euro/US and the S&P 500, that changed back in early March. Now, what we’re seeing is that with the S&P 500 goes up, so is the Euro/US. We’ve got a very, very similar correlation when we look at the British pound, US dollar.
So it’s vital that we understand that indicator based trading is slowly becoming a thing of the past. Direct inner market correlations are taking hold. It could be a global situation, likely is. But the main thing is if we’re looking at our vantage point software and knowing how to effectively use it, these inner market correlations are indisputable. I don’t have the blue line and the black line here, just the blue line, so we can easily follow this. And once again, when we look at the Aussie/US and the New Zealand/US if you’re uncomfortable buying stocks at these levels because you feel it’s too risky, then you can always go over to something like Aussie/US and buy that. These two charts are virtually identical. The same thing would be set for New Zealand/US. So we have a lot of different traits that are spinning off the S&P 500, whether it goes up or whether it goes down.
If I look at the EWZ, this is one of my favorite charts to determine the strength or weakness of the S&P 500. It’s very often been a leading indicator. And again, what somebody would say, “Well, what does the Brazilian EWZ have to do with the S&P 500?” Well, when we look at these charts, there’s a very strong argument that can be made that actually it is a leading indicator. So again, these are the things we look at in our trading, light sweet, crude oil. Again, we’re looking at multiple markets here, not just Forex. And when we’re looking at all of these additional markets, they all represent some kind of opportunity for us based on whether or not the S&P can move forward or whether it’s going to retrace. So once we understand these in our market correlations, then we can come back to our main software for analysis.
Now, when we get started on our main trading week, the first thing we want to do is make sure we’re identifying critical levels.
US Dollar Index
The dollar has been very soft, but it was this time last month when the dollar started to turn around, on the 10th of the month. This is a little bit later than the normal dollar buying cycle. But again, this is a warning sign, guys, that if the dollar has strengthened around the 10th of the month each month, then there’s the possibility that that could happen again this month. We’ve got the yearly opening price at 9613. The dollar is not down and out here, not by a long shot. Our neural index is up. Our predicted differences are starting to rise. And again, when we look at that repetitive pattern here of whatever is going on around the 10th or 12th of the month, it shows that somebody maybe only for three or four days are buying dollars.
So that suggests that the equity markets could be a little bit soft, but the critical thing is to understand your levels. So 9705 is a critical level. If we click on our F8, on our vantage point software and use the blue line that predicted moving average, 9677, in my respectful opinion, if we can close above 9677, the dollar will break higher, that will put downward pressure on the S&P 500. So these are the kind of things we want to look at going forward. Because again, this is an outlook not a recap of something that’s already happened. We’re going into the next trading week, the week of July the 13th.
S&P 500 Index
Now, when we look at the S&P 500 more directly, we can see that we’ve had some very, very strong buying on the S&P 500 since June the 30th.
So again, our triple EMA cross completed, we had a nice retracement back to that key level and we continue to advance. Now, when we click on our F8 on our vantage point software, this is an indisputable fact. I’ve taught this in the vantage point live training room. Using this blue line by itself, we can see that we’ve had one, two, three, four, five, six, seven, eight, nine, 10, 11 days of buying off of this blue line. A very, very good move. Now, what triggered that move was the blue line. Again, the medium-term crossing the longterm predicted difference with the neural index in a rising RSI, breaking above the 60 level. That tells us that we have momentum. Now, my concern going forward into next week now is the same thing that put us into this very good trade for the last 11, 12 days, which we’ve had multiple opportunities of buying off of this blue line.
We now have the medium-term crossing the longterm predicted difference to the downside up against a very, very powerful verified resistance high at 3183 and additional resistance up at the high of 3219. Now, just because there’s a resistance here, doesn’t mean that this is going to go lower. We just need to understand our levels here. Our key level to start the week is 3151. We’re looking to hold above that level. Our medium term crossing our longterm predicted difference, the same thing that put us in and kept this long for the last 11, 12 days, now should be taken under advisement that we could have an actual reversal signal. The predicted RSI is slightly overbought at 86.9. But again, these are 40 year old momentum based indicators. Vantage point’s RSI is a predicted RSI. So it gives us a bit of an advantage by looking at a different calculation there.
So again, we understand why this market went up based around the correlation to 31 other markets and why it continued to move up for 12 days. Now, again, nothing goes straight up and nothing goes straight down. So we should be prepared for some type of retracement. We’ve had a full retracement on Friday down to the vantage point 18-day predicted moving average only for it to bounce out of there by 75 to 80 full points. That is the vantagepoint to cross long. So again, knowing your levels, guys, is paramount to your success. Now, as we look at gold going into next week, gold is a key factor for a number of different currencies, for the equity markets. So we’ve put a top in here, we’re pausing, but the main thing to understand the T cross long, just like the S&P 500, the T cross long is at 178438.
As long as we’re holding above this level, then gold is still technically bullish. Our neural index is warning us we’re going to have a bit of a down day, probably on Monday, maybe into Tuesday, but we’re looking for a retracement. This is not a shift or a change in the trend at the current time. If we use our blue line by itself, we can see that we’re slipping and closing under 1804. That is definitely a concern for gold longs here, particularly as I’ve shown you that there could be some dollar buying at the beginning of Monday, Tuesday, Wednesday of next week that would again be another nail in the coffin potentially for gold long. So be careful with gold longs starting the week based around the fact that we’re closing below 1804.
Now, light sweet crude oil will of course, follow the equity markets and we can assess here that it’s struggling. We’ve got considerable resistance here that it’s built up along this vantage point verified resistance zone. That verified high coming in at 4163. It’s certainly not looking good here. So again, if the S&P 500 starts to turn lower by midweek, then we would see oil following this. And it’s important that traders understand that one will not go up, or it’s very unlikely one will go up without the other. Now, again, when we’re talking about Bitcoin, Bitcoin is again, yet another good potential investment for traders. It’s a little bit soft right now. We’re expecting some dollar strength. We’ve got good support down here at the low of 8848. We’ll continue to see if this level can hold. Because again, when we have demand for US dollars, it’s usually very short term, only three or four days, maybe a week. And then it usually turns around.
So Bitcoin probably going to come under a little bit of pressure next week only to see it likely turn around by the latter part of the week. Now, as we move into our main currency pairs, again, the Euro continues to struggle below the 114 level. We can see these verified zones as identified by vantage point. 11353 has stopped any kind of rally here. We’ve come down, kissed one 11263, but it looks like a cell signal is starting to form here. Now, the RSI is not in agreement, it’s holding at 64.4, suggesting that we still have upside momentum. My optimism on this however remains heavily guarded because of that repetitive pattern around the 10th of the month that I’ve seen since the COVID stuff has all started up mainly in the early March there, when the dollar cycle buying usually at the beginning of the month has shifted a little bit towards the middle of the month.
Euro versus U. S. Dollar
So I would expect that the Euro is going to come under selling pressure unless we can very quickly take out this one 1350 area. Now, what I would advise is I would advise my own direct clients here is be careful of a false break on Monday here. If the Euro breaks higher on Monday, guys, it’s very likely it could turn around on Tuesday, Wednesday, and Thursday. So just be careful with Monday trading because it can be very, very misleading to say the least. Now, if the dollar index can turn around, then we could see the US turnaround with it.
We’ve got very, very formable support here at 9376, the verified zone. You can see that we tried to break below that, but then the buyers stepped right back in. Now, the critical level from vantage point 9457, we’re only looking at the current time for a retracement to this level, but the hurdle that it’s got to get above is this one, the blue line. Now, we’re closing the week at 9411 above the long predicted at 9406. That in itself is bullish here, guys. Now, again, be careful about Monday trading, but on Tuesday, well, possibly even on Monday, I would certainly be looking for longs. Our predicted differences are starting to rise with the neural index and the RSI is coming up from an oversold condition. So again, if nothing else, we’re likely to correct higher.
British Pound versus U.S. Dollar
Now, as we look at the British pound for next week, the British pound/ US dollar, very, very significant resistance at 12687.
If we get into a boat of dollar buying, then this is an excellent place to look at shorts around that 12685 mark. Now, we need something from vantage point to tell us that this could be going lower right here. We can see that our medium term is trying to cross our longterm predicted difference to the downside. One of the most powerful contrarian indicators that I personally have ever seen, but I want it with the neural index. The neural index is still green. So probably a little bit more upside on Monday only to see it violently potentially reverse on Tuesday. So like I said, guys, know your levels and these levels here are laid out before the market even opens. 12687, I could see a little push above that level, only for it to turn around, but again, we want to watch the S&P 500 very closely.
If the S&P turns around and tanks on late day, Monday, the pound will follow.
U.S. Dollar versus Japanese Yen
Now, another leading indicator for stock traders that you should be looking at is the dollar/yen. We’ve got a mysterious break low down here, our T cross long coming in at 10730. We’ve basically closed below that level for multiple days in a row. And it looks like the dollar/yen is getting ready to break back towards the bottom part of the range. That’s fully supported by the neural index, the predicted differences. Our MACD is looking good and our RSI is again perfect when we use it with the key vantage point levels. When we look at our FA by ourselves, we can see that predicted moving average. We use that the same way as a fund manager would use a 50 day or a 200 day moving average.
We’re just getting closer to price. When we look at the close below this with the RSI breaking below the 40 level, this gives us a clear signal to basically short this pair. So we are likely going to move into the lower end of the range, but just remember guys, we are still well within the overall range on this particular pair.
U.S. Dollar versus Canadian Dollar
Now, as we look at our three other main equity-based currencies, the CAD, the Aussie, New Zealand, the CAD is also giving us a warning sign that there could be trouble on the horizon for the S&P 500. If the US/CAD is going up, then in most cases, the S&P 500 is going lower. Now we’re closing the week, basically rate on the vantage point T cross long, but when we come back and look at our FA, we can assess here that on Thursday, we closed above the blue line at 13571, which led to a nice little rally back up to 13631 on Friday. Our predicted differences, our neural index, our MACD, all pointing saying that this pair is going higher.
However, the RSI, again, mysteriously is pausing below the 60 level. And this is again an alternate way to use the RSI. A lot of indicators that were made back in the late ’70s and ’80s, accumulation, distribution, stochastics, [inaudible 00:17:47] size, they were all made back about 40 ago, and they all had very similar calculations. But most traders are far too consumed with the overbought and oversold condition of this particular indicator where a 60-40 split will tell us when we’ve got strength building it is called a relative strength indicator. Yes, it can be used for overbought and oversold, but it’s far more effective engaging the momentum, the slope of the line, the break of the 60 area, that tells me that I’ve got momentum building here. So for now, slight bias to the upside on the US/Canada. And if there is a slight upside to US/Canada, then that would mean that there would be a slight downside to the Aussie/US and the New Zealand/US. Just like the S&P 500, the Aussie/US, excuse me, is getting all tangled up around 6976.
Australian Dollar versus U.S. Dollar
If there’s a crack in the dam here guys, on the S&P 500, then you want to get shorts in on this pair almost immediately by probably mid day Monday. What I always advise is, do not take any trades until at least 9:30, 10:00 AM Monday morning. You have to let all three markets come back in. The Forex market opens at 5:00 PM on Sunday, but remember the London market doesn’t come in til around … London and Europeans don’t come until around 2:00, 3:00, 4:00 AM Eastern. And the North American, the Canadians and the Americans, they don’t come until at least 8:00 AM, 7:30 AM. So let the market settle before you look at getting into these trades. Right now, the Aussie is stalling at 6914, but a break of that key vantage point level will likely trigger a reactionary move down to 6861 very, very quickly, or even lower, 6833. It would be a likely price target for next week.
New Zealand Dollar versus U.S. Dollar
When we look at New Zealand/US we see the exact same problem is the New Zealand has made a big move up here, but it came right back to an identifiable verified resistance zone inside the vantage point software. That high or the top of that verified zone is 6583. We must break free and clear of that area and close above that area for at least a couple of days here, guys, before we take the pressure off the downside. Because again, there is still considerable risk in the market just to end the week on Friday. Trump had stated that, okay, he doesn’t care about a phase two. It’s not a priority. Well, that could be interpreted a number of different ways. So again, that will be the start of the volatility in the week, but I’m sure it will not be the end. So with that said, this is the Vantage Point AI Market Outlook for the week of July the 13th, 2020.