VantagePoint AI Market Outlook for the Week of September 7, 2020
U.S. Dollar Index
Hello, everyone. Welcome back. My name is Greg Firman, and this is the VantagePoint AI Market Outlook for the week of September 7, 2020. To get started this week, we’re going to begin where we always do, with that very important US dollar index. We find ourselves right back where we were again over the last several weekly outlooks where the market, the dollar index specifically, is stalling at that key VantagePoint T cross long, which I’m highlighting up here. Again, what we’re doing is we’re using that level as a pivot area to tell us whether the dollar is bearish or whether it’s actually bullish. We do have a mild bullish signal here, but again, we’ve seen this signal many, many times before over the last several weeks, if not the last several months, and the dollar has failed every time.
We look at that key level of 92.93, the dollar did get a boost from the nonfarm payroll number on Friday, but it was not able to hold its gains into the close. It’s very important that we use the closing price with these pivot levels to understand that this is just intraday volatility. How the market closes usually determines the overall outcome. For now, the market remains bearish. We can see that the predicted RSI is stalling. Is above 50, but it is not breaking above the 60 level on the RSI where we’re looking for momentum to build for dollar strength and we’re just not getting it at the current time.
We are coming out of summer trade. The dollar could catch a bid in the month of September or October leading up to the election, depending on the COVID virus, depending on a lot of different fundamental factors that could drive the dollar up or down. But for now, the dollar remains structurally bearish. When we look at the key VantagePoint predicted moving average, or long predicted, it paints somewhat of a bullish picture when we’re holding above the 92.67 level, but we’re barely able to hold above this, guys. Despite that, we still have very strong, verified resistance up to this 93.37, 93.40 area, and even stiffer resistance up to the high up at 93.89.
What I’ve often stated with my own direct clients is that, look, I think we need to clear 94 before we get comfortable buying dollars to any real extent because of these repeated failures. The structure of this pattern looks to be that the dollar is getting ready for its next leg down. But again, if we can break above those key VantagePoint levels, we could see further dollar strength, but we’re going to need some positive developments in the markets to assist with that.
One of the positive things that’s helping the dollar gain some ground here is gold is struggling also at that key VantagePoint level, the T cross long, 1957.37. We need to break about this and hold above this right now, we can see that gold is breaking down below the 40 line on the predicted RSI. The predicted differences are moving lower. The neural index is pointing down. This is at least a short term positive for the US dollar. But I think at this time a particular time, it’s only a short term positive unless gold can start breaking down below the 1900 level. I would like to see it actually break down below 1874, before I get too excited again about dollar longs or shorting gold contracts.
The S&P 500 Index
The S&P 500, we’ve also seen this pattern many, many times before. I’m often asked about this, is this the perfect time to short the S&P 500? Well guys, we have to look at these VP charts and make that call. We can see that we’ve had multiple retracements back to the VantagePoint T cross long, only for the market to pause around that level and extend higher. We can see multiple, multiple examples of this.
Again, this is an outlook, not a recap of something that’s already happened. We’re right at that level right now, 3435. We’re closing slightly below that in thin illiquid markets, but let’s remember guys, the market has made a big move up over the month of August, probably one of the biggest moves I’ve seen in recent history. Our corrective move lower is perfectly normal, but whenever we see the RSI looking like this, very much like it’s fallen off a cliff, there’s very seldomly do we see any follow through on this.
My optimism that the S&P 500 is going to completely reverse and will go lower, I think that’s very unlikely at this time. We look for our low point, which is 33.45. If we break down below 33.45, we could be looking at a trend reversal on the S&P 500, but we are certainly not there yet, guys.
Perfectly normal for the equities as we’re coming out of summer trade thin illiquid markets, not really a true price here, guys. Let’s see how we start the first week back after summer trading. But for now, the equities still remain net positive.
Oil is following equities lower, which is pretty obvious with the Intermarket correlation. But I think you’ll find oil will also find some support at down around the 39 level if the equity markets, more specifically the S&P 500, if it starts turning around, then oil is going to follow. We could have premium long here on oil in the first week back. Again, oil usually holds its gains until mid October. I know this is we’re dealing with the bizarro world with the COVID stuff and everything else, but it’s still ultimately going to follow those stocks. If stocks can recover, oil will be a potentially a very, very good play.
I also see some potential opportunity forming in Bitcoin. Again, Bitcoin taking a big hit in Friday trade on that nonfarm payroll number, but you can see at the end of the day, Bitcoin still managed to recover and close above its opening price. It also so closed above a verified support low, which is, again, this is GBTC, this is another way to look at Bitcoin. You can look at Bitcoin versus the main contract or through GBTC.
Again, potentially a very good opportunity on that GBTC Bitcoin ETF. But when we look at the main Bitcoin contracts, we can see again, that we’ve had a big sell off on that dollar strength. I personally believe that that nonfarm payroll number was leaked midweek, and that’s where the dollar strength came from. But the dollar is usually strong in the first week of the new month, so this is likely a corrective move lower in Bitcoin. But again, Bitcoin has proven itself over and over again in the last several years to be a very, very good buy on dips. Look for a potential opportunity for this turn to turn around.
We are grossly oversold on this. We could extend lower. I don’t think we’re going to get down into this 9,000 mark, but if we do, it does look for the potential of a very good long trade.
Euro versus U.S. Dollar Index
As we move into our main Forex pairs, again, I’m going to hit the main payers here, guys, Euro/US. Euro is a very high correlation gold. If gold recovers, the Euro will recover also. We’re seeing very strong support on this verified level here, the verified support level, at one 117.63. Additional support, very strong support, down to the one 117.11.
But the Euro is really struggling to make any gains up here. But that doesn’t mean the Euro is down and out. The event risk that you should watch this week is, of course, the ECB. The ECB has been very vocal this past week that they’re not happy that the Euro has appreciated 6% this year.
Personally, guys, I find that extremely confusing because they were worried that the Euro, when it was down in the 108-110 area, that the Euro was going to cease to exist. The Swiss National Bank sold off the country’s gold reserves to prop up the Euro. Now, the ECB is whining that it’s too strong. Very, very confusing with these central banks, guys. They’re trying to talk the Euro down.
We’ve seen, history tells us guys, that that doesn’t work. Every time the Central Bank tries to talk a currency up or a currency down, it goes the other way. So if they’re trying to talk this Euro down, it’s probably going to extend higher. Watch those key support levels. To be clear our RSI is telling us we do not. At the current time, have a lot of momentum to the downside.
British Pound versus U.S. Dollar
The pair that will follow this is the pound dollar. The pound dollar, again this past week, and this is the benefit of using the VantagePoint software and also using the VantagePoint software determine stock placement. When we look at this 131.98 is the T cross long. The market has gone up, made a fairly significant move to the upside here. We’ve hit a high of almost 135.
Now, in a natural sense of things, we’ve pulled back to the VantagePoint T cross long at 131.98. We’ve kissed it, and we bounced off of that area substantially on the close of 132.79 The British pound/US dollar has more recently moved above its yearly opening price at 132.40. This pair is clearly bullish. But we need to hold above this VP level at 131.98.
I would like to see the market stay about 132.47. That will tell me that the pound is likely to start extending higher and the dollar sell off will accelerate. But again, I don’t think that’s going to be… I think we’re going to go sideways for a few weeks before that actually happens.
U.S. Dollar versus Japanese Yen
With the US/Japan going into next week, we’ve got a bullish signal here, guys, but this is one of the most dangerous places to trade this. Any pair, any Forex pair, any commodity, any stock, because we’re smack dead in the middle of a range that’s being identified by the high and low of this particular bar, 106.94 and 105.20 In a situation like this, we would sell the top and we would buy the bottom, until such time as this breaks.
This pair will also be heavily affected by gold and by the S&P 500. Where the conundrum here is that if gold actually starts to catch a bit again, then so will the Japanese yen, and it will move lower. That would tell me that the equities are starting to move lower. But again, that’s yet to be determined as we come out of summer trades.
To start the week, we look at 106.08. Can we hold above this? We’ve got our medium-term crossing our longterm predicted difference, telling us our medium-term strength is weakening. When we look at that with the neural index and the fact that the RSI is unable to break above the 60 level, tells us that we have very little upside momentum here. That sediment could change very quickly if the S&P 500 accelerates higher. That’s what the dollar needs against the yen to support longs.
But again, for now, this is a very, very choppy area to be trading this. I would strongly suggest that we monitor a break of this particular bar, the August 28th bar. Once we break this bar, to the upside or the downside, we are likely to see the bigger move, but there is a slight bearish signal here in place, at least for now.
U.S. Dollar versus Canadian Dollar
With our three main former commodity currencies, which are now what I’ll call equity-based currencies, that CAD, the New Zealand, and the Aussie, these three pairs will follow the S&P 500. If the S&P 500 recovers, US/CAD will move lower, Aussie/US will move higher, New Zealand/US will move higher. When we look at our charts, we can see we’ve had a big push up on Friday on US/CAD, but the pair was stymied at 131.62, the T cross long.
There is an actual science behind trading when we use these pivot levels. When we look at this, we can say, if we move towards the 131.60 area, that’s a premium sell because the main indicators and VantagePoint are suggesting that it still doesn’t have enough to break through.
The other flip side of that same coin, we would look, if we break above 131.62 and close above that.don’t get caught up in the intraday volatility. If we poke our head above this blue line, that’s like the old farmer’s story where you’ve got a herd of cattle and one cow keeps sticking his head out of the fence, but then the farmer whacks him on the nose and he very quickly goes back. That often happens around these key levels.
131.62, we break above it, we close above it for one or two days in a row, then we’ve got ourselves a long trade. We are not there yet. Watch that main pivot area. You can sell into 130.62 and buy above 130.62. Those are our two options. But right now the signal is bearish while below 130.62.
Australian Dollar versus U.S. Dollar
With that dramatic sell-off in the equity markets, the last couple of days, the Aussie and the New Zealand have both pulled back, but we want to take note of where they stopped. The market pulled back to the VantagePoint T cross long 72.49. That’s the target area for longs to begin the week, but a little bit more of a corrective move could be in the cards. We see our medium-term crossing our longterm predicted difference with the neural index. This is a classic VantagePoint signal that very seldomly fails using that medium term, crossing the longterm predicted in conjunction with the neural index.
What we want to assess here, though, when we modify our relative strength indicator and forget about the overbought/oversold nonsense, focus more on momentum. This is a momentum-based market. When we look at this, we’re looking for a breakdown below the 40 level. We didn’t get that. We’ve got a reverse check mark here and it’s actually bouncing off of that 40 level. Which tells me that the Aussie is not as weak as what it would appear, nor is the S&P 500. S.
New Zealand Versus U.S. Dollar
Again, if the S&P 500 recovers, you will also see the Aussie immediately recover. The same thing, guys, is applicable to New Zealand. Virtually the same, trade. I feel New Zealand has a little bit better value, but once again, this is an outlook, not a recap of something that already happened.
We can assess here that we’ve come down the T cross long 66.60 on Friday on that vote of dollar strength after the nonfarm payroll number, but we can further assess the market. There is no Fibonacci here, guys. There’s no Elliot. There’s no other indicator here, other than that VPT cross long. We’ve come down, kissed it to the number, and then accelerated from the 66.60 area to close at 67.20.
For the savvy trader that knows these key VantagePoint levels, we can let the market come to us. That is the key thing in trading, guys. Let the market come to you.
With that said, this is the VantagePoint AI Market Outlook for the week of September 7, 2020.