Welcome to the Artificial Intelligence Outlook for Forex trading.
VIDEO TRANSCRIPT
Nasdaq Composite versus S&P 500 Index ($DXY)
Hello, everyone. Welcome back. My name is Greg Firman, and this is the VantagePoint AI Market Outlook for the week of March the 6th, 2023. Now, to get started this week, we’ll begin with a complete overview of the equity markets. Now, in last week’s weekly outlook, we or I discussed, excuse me, the MA.DiffCross, the medium term crossing against the long-term predicted difference in a buy signal, was forming on the global stock markets. Now, when we look at this, you can see the progression as we flatten out midweek and then we start rising on the NASDAQ Composite. We can look at the S&P 500. We can see the exact same thing, the progression of a trade, because, again, this is an actual outlook, not a recap of something that’s already happened. We’re always forward-looking based on the predictive indicators, not lagging secondary indicators.
So when we look at this right now, the NASDAQ has moved and closed above the T.CrossLong, 11,577. We’re closing 11,689. The S&P 500 also closing above the T.CrossLong at 4045, which is again, not a strong move above it, but a move above it, just the same. As we can see, it’s starting to progress. Now, our neural index is positive, but what we want to really look at is the global equity markets, not just the US markets.
Nikkei 225 versus S&P 500 Index
So when we look at the S&P 500, first of all, the main thing that we want to assess is the direct intermarket correlation, the positive correlation between the S&P 500 and the other indexes. If I zoom this into the three-month timeframe, you can actually see how the market kind of goes sideways a bit and then starts climbing. As we hit March the 1st, the market immediately starts climbing. Again, this is what we talked about in last week’s weekly outlook, that the equities are not as weak as what it would appear.
So again, looking at that Nikkei 225, which was already turning positive, but both remained above their yearly opening price. The Dow Jones Euro Stoxx 50, we can see that that is well above its yearly opening prices. I think it’s very important to point out that other than the Dow Jones Industrial that was briefly negative for about a week, week and a half, it’s now closing above its yearly opening price, also at 31,148, closing the week again above that. But when we look at these indicators, the progression of the trade was already in progress in last week’s weekly outlook. It’s just simply progressing forward.
Bitcoin versus S&P 500 Index
When we look at the Bitcoin contracts, Bitcoin’s still having a pretty good week, a little softer into the end of the week, but firmly above 16,549, the T.CrossLong 23,377. We’re closing below that. So, Bitcoin a little bit softer.
Russell 2000 versus S&P 500 Index
The Russell also looking quite good closing above that T.CrossLong. But again, we’ve never been negative on the year on the Russell, the NASDAQ, the S&P 500, and we’ve never been positive on the VIX. You can see right from the very start of the year, we’ve had multiple retracements, but every time we’ve moved back towards the yearly opening price on the VIX at 2390, we’ve gone significantly lower, and now we’re making another low this past week.
VIX versus S&P 500 Index
So as the VIX moves lower, the global equity markets start to rise. These are things we want to make sure we understand.
DAX versus S&P 500 Index
The DAX also moving, I would argue, more aggressively higher than any of the other indexes. So again, when we look at the global equity markets as a whole, we can say, “Okay, the weakest link in this group is the Dow Jones Industrial.” So if we can clear the T.CrossLong at 33,356 into next week, then there’s still life left in the equity markets. And again, this is something that, again, the media tries to spin things different ways, but when we look at the actual charts, we can see it quite clear.
Now, when we take that and we move that into our commodity and Forex trading, then once again, these are things that we want to make sure we want to look at. First of all, the global equity markets have a very, very strong high, a very, very strong correlation to one another. That’s the first step in identifying this. But when we look closer at this, the main inner market correlation or inverse correlation we want to focus on, which I’ve talked about for years, is the S&P 500 to the Dollar Index. So when we look at the Dollar Index, going back to December, we can see that December wasn’t a great month for either stocks or the S&P 500. But as we go in to January 2023 and we do basically a global reset, you can see that the Dollar Index, during this period of time, has not made any new highs going back from December.
In December, we hit a high. That came in at about 15,896. We went into January on a negative month with only a high of 105.63. February is one of the strongest months for the dollar, but we still didn’t make a new high at 105.35, and we’re basically flat on the month of March. But there’s a pattern here. This is not what I would call necessarily sideways trading. You can see that the stock market has hit a low in December also at 3764. But then the low, as we went into January, was 3794. Then in February, which was indisputably a stronger month for the dollar, the S&P 500 still made a higher high and a lower high, that low coming in at 3943.
So, so far in March, we’ve gone slightly lower than that at 39,028, but we haven’t moved below the yearly opening price. And whenever we get down into this area, we see buyers coming into the market. So it’s very important that we’re looking closer at these charts and not getting caught up in the regular intraday nonsense. So when we look at the Dollar Index, the Dollar Index basically stalling. Now, I do anticipate some dollar strength next week. That would be perfectly normal. The monthly cycle that I’ve discussed multiple, multiple times over the many years of doing these outlooks is that the dollar is usually strong in the first week of the new month. That’s perfectly normal. But it doesn’t usually last very long. Usually, it lasts until the week after the non-farm payroll, which would be about a week this coming Tuesday, Wednesday. So whatever the payroll number is, the dollar usually sells off either way by mid-month. So right now we’re stalling.
U.S. Dollar Index versus Crude Oil
Again, we’re not making any new highs on the dollar despite what the media’s saying. The charts don’t lie, right? So right now, if we hold above the T.CrossLong 104.17, then the dollar still remains slightly bullish. But the yearly opening price coming in at 103.66, I believe we will test that within the next week or two forward-thinking here. And the dollar, again, is not overly strong at the present time. Light sweet crude oil is absolutely responding to this dollar weakness, but we’re still below the yearly opening price. The predicted differences are both pointing higher. The Dollar Index, we have an MA.DiffCross to the downside, but we need this pink line crossing the zero line to accelerate dollar losses. I personally don’t believe that will happen next week, but it’d probably be the week after next looking at these repetitive dollar cycles. But if the dollar has any chance of further gains, we must clear the 106 level on the index. Right now, oil is starting to gear up, but we’ve got to clear, once again, the yearly opening price, that’s about 8073, to get any kind of real move going here.
Gold versus U.S. Dollar Index
Now, with that slight dollar weakness, you can see that gold is responding to this. The inverse inner market correlation is indisputable here. Now, the longer term seasonal pattern on gold, I’m usually a gold buyer, actually, guys, in April, and we’re only a matter of weeks away from that, and that’s usually when the seasonal pattern on the dollar starts to soften, meaning the dollar starts to weaken between April and usually around early September. Then the dollar is very strong between September and November and weak again in December. These are patterns that we can track and that we can trade that are very, very effective. So right now gold is pushing higher, but I still think we’re a week away before we have any bigger move. But the yearly opening price there, 1824. You can see this week, we came right down to that particular level, and then we’ve bounced out of there, and now we’re retaking that T.CrossLong at 1845. So, 1845 is the level that you want to keep your eye on for next week.
U.S. Dollar versus Swiss Franc
Now, expecting some dollar strength would tell me that US Swiss Franc would be one of the more value places to buy. So we would look at that from the T.CrossLong standpoint. The T.CrossLong 9318. I believe that that is a very reasonable area to look for longs. Let it pull back a little bit further to that. But I also don’t think it’ll be a longer term trade because I think the dollar is getting close to a top. I think the dollar will still make gains throughout 2023, but it will be nothing like 2022. The Fed will have no choice but to slow these rate hikes. So for now, this is a place of value. Watch that level, 9318, very closely.
Euro versus U.S. Dollar
The counterpart to US Swiss Franc, of course, is Euro US. Now, for next week, our T.CrossLong is 106.54. That is significant resistance. And again, we’re below the yearly opening price, that level 107.04. As long as we stay below 107.04 and we continue to close below that level, then it still is pointing towards at least short to medium term dollar strength. But again, a bad payroll number could change things very quickly. We’ll have more economic data this month. But the main thing is know your levels and know your inner market correlation. So again, all eyes will be on the dollar and all eyes will be on the stock indexes. One of these two are getting ready to make a bigger move higher. And I believe, based on the charts that I’ve shown you here, there is still life in the stock market. It’s not as grim as what some of the media is telling us.
British Pound versus U.S. Dollar
Now, when we look at the pound dollar, the pound dollar spending the entire week last week hitting into the yearly opening price and the VantagePoint T.CrossLong. They’re coming in at almost the exact same level, 120.97 and 120.56. This is your resistance for next week. As long as we stay below these two levels, then shorts are still in play. The indicators from VantagePoint still support that, predicted differences pointing down again, but they’re a little bit sideways here. When we look at this, they’re trying to push higher. Now, if the pink line moves above the zero line, this would tell us that the dollar is weakening sooner than we anticipate. Because let’s be honest here, if we look at the commitment of traders reports, you’ve got an excessive amount, in my respectful opinion, of dollar longs here. It’s very, very crowded trades.
But I also don’t dispute that interest rates are a driver here. And it looks like the Fed at the very least will continue 25 basis points. But like I’ve said in the VP room this week, if we’re climbing a mountain here, I think I can see the summit. We’re definitely not at base camp here. So there’s not going to be a huge climb like we had last year, and an end is in sight, in my view, on these hikes later this year or early 2024. So again, I think you’ll have a lot of people rethinking that dollar long trade come April. But for now, keep an eye on our predicted differences. And again, if we can hold below 120.54 and the yearly opening at 120.97, then the short will remain in play on this pair at least into the latter part of next week and maybe into the former week or the next proceeding week.
U.S. Dollar versus Japanese Yen
Now, with the dollar yen, the dollar yen, the interest rate differential between the Bank of Japan and the Federal Reserve is huge. It’s very big. The question here, is the Bank of Japan going to do anything to change that? So that could cause a shock to their currency to the downside, which they don’t want. I think a lot of people have forgot that they were talking about intervention at the beginning of 2022 to weaken their currency. That kind of blew up in their face, as I’ve said more than once.
But right now you can see the Dollar Index and the dollar yen are basically both stalling up here for the month of March. But in most cases, the dollar yen would push higher in the first week of the new month. But I’m going to count next week, the week of the non-farm payroll, as the first week. This was a split week this past week, part February, part March. So next week, I believe that the dollar can make further gains against the yen, but also, I think it’s coming to an end soon. So for now we watch our T.CrossLong, 134.70. We remain long while the market holds above that particular level.
U.S. Dollar versus Canadian Dollar
Now, the US-Canadian pair will be susceptible to moves and oil now and the stock market. So if stocks and oil move higher, then US-Canada could be very close to a top. Again, the interest rate differential still favors the US dollar because the Bank of Canada, I’m domiciled in Canada, there’s already talk, the word on the street, so to speak, here in Canada is that they’re gearing up for a cut in the next few months. That would hurt the CAD against the US dollar, but I believe the inner market correlations will reign supreme anyway. If stocks do push higher and the dollar moves lower in April, then that would be a trigger for US-Canada to move lower. Right now we have significant verified resistance. The entire week, guys, we’re we’re trading between about 1.3650 and the VantagePoint T.CrossLong coming in about 1.3519.
But the real level was the yearly opening price. We kept coming down to this level, and every single time we had buyers, including me, buying from this level. Now, as long as we hold above 1.3551, then further longs are reasonable. But if we break down and close below 1.3551 two days in a row, then we close below the VantagePoint T.CrossLong, which is very close by at 1.3519, then we’ve got a problem. And I think we should get out of Dodge on these longs. Because, again, oil is starting. Commodity prices, I believe will improve. The more we go into 2023, the more attractive commodity prices are going to look, and that’ll favor the Canadian dollar.
Australian Dollar versus U.S. Dollar
Now, it will also favor the Aussie and the New Zealand. So we want to keep our eye on those also. Right now, the Aussie, we’ve got the RBA next week. I believe that will at the very minimum push the market up to the T.CrossLong at 6820. Our MA.DiffCross, you can see that this matches the S&P 500. If you look at the S&P 500, I bring this back onto the daily here, and we go on to our three-month timeframe, you can see that on the S&P 500 that that MA.DiffCross occurred basically at almost the exact same time as it did on the Aussie-US currency pair. And that is the inner market correlation that you want to know and understand, and then apply your VP indicators to that. So the pink line over the blue line, basically that signaled a bottom for not only the S&P 500, the DAX, the Nikkei, the NASDAQ, Bitcoin, Euro Stoxx 50, all these stock markets started to turn around. Well, so did the Aussie, right?
New Zealand Dollar versus U.S. Dollar
Friday, the Aussie taking a nice little spring off of that monthly opening price at 6728. It’s important to understand that too, that the Aussie so far is still positive on the month. But we need to get over the yearly opening price at 6817. And we need to clear the T.CrossLong at 6829. The New Zealand-US pair is almost identical. And again, you can see that MA.DiffCross right there going back to February the 24th. We push a little bit lower and then we start moving. As the predicted differences rise, you can see the price goes up. The only thing containing this is the VantagePoint T.CrossLong three days in a row. Now, you’ll still have a good short off there potentially if the stock markets move lower. But if the stocks continue to climb and gold and the other commodities start to rise, then the Aussie, the New Zealand and the Kiwi will likely follow, and it will be the dollar that suffers from this. So with that said, this is the VantagePoint AI Market Outlook for the week of March the 6th-
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