Vantagepoint AI Market Outlook for December 12, 2022

Welcome to the Artificial Intelligence Outlook for Forex trading.

VIDEO TRANSCRIPT

U.S. Dollar Index ($DXY)

Hello everyone and welcome back. My name is Greg Firman and this is the VantagePoint AI Market Outlook for the week of December the 12th, 2022. Now to get started this week, we’ll begin where we always do with that very important US dollar index. Now going into the final trading weeks of 2022, increased the height of volatility will be next week with the Bank of England, the ECB, and of course the much anticipated FOMC announcement. Now again, the media spinning things out of control as to what the Fed is going to do or not going to do. I believe you’re going to get a very aggressive Fed that is going to try and put the media back in their place here and get them to stop putting out disinformation, misinformation, which they’ve repeatedly done despite the fact the Fed has been very clear as to what direction he’s going in, so it will be a very, very interesting meeting.

I believe personally, in my respectful opinion only, the Fed means Powell specifically will take a shot at the media here and say, okay, I didn’t say this. I didn’t say that. You said that. Again, you’re going to see a lot of volatility leading up to and including this announcement. Now, when we look at the dollar, we can see that basically the last quasi bullish signal we’ve had on the dollar index was going all the way back into essentially the beginning of November. The dollar has been slowly falling down. We’ve had multiple retracements. Now the dollar hasn’t done well, but it hasn’t done horrible either. It’s done fairly well against the Canadian dollar, against the Aussie dollar, but it’s lost ground against the British pound, the Swiss Frank, so a very mixed batch here, but I believe the Fed will set the course or the path of where he’s going in 2023, but I also don’t think he’s going to say that there’ll be rate cuts or a pause anytime soon.

What we look for is as long as we’re holding below the TCross Long 106.19 is our key level. Now the indicators here are flashing a warning sign. Our neural index strength is turning back up. We’ve got a yellow on the neural index, which is basically a caution signal. We have an MA Diff Cross to the upside. All of this is warning of pending dollar strength, but it will be determined by what words that J. Powell uses, which of course we have no control over. Again, if the dollar’s been moving lower, and the normal seasonal pattern in the dollar doesn’t do well in the month of December, now the dollar is bucking that trend against some of the currencies against some of the commodities and of course the equity markets, so the main correlation that we would be watching next week is one up and one down.

S&P 500 Index

When we look at this right now, this is a rare occasion where both the S&P 500 and the dollar index are both pointing down. These are things we would expect in the month of December, particularly ahead of this Fed announcement that they’re not willing to take dollar longs or shorts.

They’re not really willing to take a strong position in the equity markets either. You can see we have the verified support zone, the low 3918. Now, once again, be very cautious on this Monday’s trading. It’s going to be very, very choppy. This entire week will. I believe that the bulk of the positions will be decided by this coming Friday, so right now this is pointing lower in stocks. I think some clarification because again, the media the other week suggesting that the S&P or the global stock markets are in a bull market is simply not factual, and I don’t even know what alternate reality they’re living in. The yearly opening price on the equity markets on the S&P 500 is 4778. We are still a solid, what, 15, almost 20% down from that. We’ve been down 30% on the year. When we look at the structure of the S&P 500 over the last year, it’s actually quite ugly. We look at the yearly opening price here. This is the first time in about 15, I would say approximately 15 years where the S&P 500 has not been above the yearly opening price, meaning it’s been negative on the entire calendar year.

When they’re calling for a bull market, I’m not sure where they’re seeing that because again, we’re still down close to 15% on the year. If you look at the structure of this, people will attach wave theories to this. They’ll use all kinds of wild and wacky indicators to try and analyze this. But the simple fact of it is we’re making lower highs and lower lows. That is an indisputable fact. If you’ve bought the S&P 500 on January 1, 2022, you have consistently lost money this entire year. Yes, there is the possibility of the Santa Claus rally. If we get that, that will come courtesy of the Fed. I certainly have no control over what he’s going to say, but I will say that my view is he is going to try and put the media in their place on Wednesday. That’s what I think is going to happen here, because again, inflation has not come down anywhere near the amount that they’re looking for on their target rate.

Right now, keep a very, very close eye on these verified supports low. The 3,900 mark is a big level. The indicators here are pointing down the predicted medium term and the predicted long-term differences are both below the zero line and pointing lower. What that means is that there’s a crossover has taken place. If we click on F7 in our software, you can see that the blue line crossed the black line back here. Again, if we break down below this 3,900 mark and stay below 3,900, you’re likely going to see a potential of a retest down at 3744 potentially on a very hawkish Fed. We could even hit down into the 36 level. Again, expect a very volatile market.

Crude Oil

Now when we talk about seasonalities, people are assuming that oil will only go higher. The seasonal pattern, we’ve heard this from Cramer and some of these guys on CNBC, VantagePoint to be clear on this, has forecasted oil going lower back here. We’ve had a retracement, but again, we have not had a trend reversal.

Now, to make things worse, we’re breaking down below the yearly opening price. That’s 75.39. The energy sector was very hot in 2022, but if you continue to hold these positions, you’re now losing money. We’ve now turned negative on energy or at least on oil contracts on the year. 75.39, the oil contracts have always, in my respectful opinion, been somewhat of a leading indicator for the dollar and for the S&P 500, and this favors the dollar over the S&P 500. Bringing in that inner market correlation is very important. Now, what I’ve done before in the past, I’ve also brought in additional inner market correlations to help confirm this. Now you remember months ago where I had identified using the bull bear gauge, using the inner markets that drive other markets. Magna International stock, when it started to turn lower, and it broke down below the VantagePoint TCross Long, this stock has a hundred percent inversely correlated to the dollar index.

This is the theory or the basis of intermarket technical analysis that if Magna stock moves lower and it’s 95% inversely correlated to the dollar index, then this too is warning of dollar strength. Again, it will be determined by the Fed. For the savvy trader that can look at these things, keep an eye on this stock because again, if the dollar does tank, then this stock will be a very good buying opportunity on this particular stock. The indicators on VantagePoint right now, they are mixed, but they’re warning us that this stock could be getting ready to reverse. Again, if this stock Magna International reverses above the key VantagePoint TCross level of 59.50, then that will confirm to us the dollar is going to follow the seasonal pattern and it will move lower into the end of the year.

Always remember, the main seasonal pattern with the dollar is that the dollar is very strong in mid-January to approximately April, mid-April, and that’s something we definitely want to keep our eyes on.

Bitcoin

Now, when we look at, again, the Bitcoin, Bitcoin continues to hold its ground basically going flat. Just always remember, once again the media spinning misinformation, disinformation about Bitcoin, making their comments, the reality which they just don’t seem to want to accept, or maybe they’re trying to deter us, but Bitcoin’s annualized returns 230 some odd percent for the last 10 years. This has been the number one investment. Bitcoin is now classified as a commodity by the CFTC. Bitcoin has about a 98% positive correlation to the global stock markets, so if the stock markets move higher, then Bitcoin will move higher. This puts the media, the disinformation and misinformation from the media, at bay because if we can identify these direct intermarket correlations, then we can disregard anything that the media is saying and say, okay, well if stocks are the winner between this battle between the dollar and stocks, if stocks are the winner, then Bitcoin will go higher. It doesn’t matter what the media is saying about this.

I would remain that the global stock markets will decide whether Bitcoin moves higher or lower going into the end of the year and next year. Once again, it’s going to be tricky. The TCross Long, 17,069. One of the things I did see last week is Bitcoin moving higher. Even when the stock market was down, Bitcoin was going up, and so is Ethereum, so keep an eye on this because remember, Bitcoin’s not just all about Bitcoin here guys. It’s about blockchain also. Right? This has been the go-to for blockchain, so it’ll be a very, very interesting year end. Again, watch your stock markets very, very closely.

Euro versus U.S. Dollar

Now, as we look at our main currency pairs for this coming week, ultimately the Fed is going to decide the fate of the dollar, not me, certainly not me, so I’ll be watching very closely. The Euro basically not doing much of anything this past week. What we want to do here is identify key support levels, 1.0405, identifying the primary trend. The Euro is still in a massive downtrend. The yearly opening price on the Euro 1.1367. Very important to identify what the real trend is here, guys, not what the media is saying, not what this indicator or that indicator. It’s just if we bought the Euro on January 1st, 2022, how did we do? Well, we did horrible is how we did. The Euro at one point well down below the 97 mark, so down some 15% or more on the calendar year. Again, we always want to make sure that we’re identifying this.

Our immediate verified resistance, high 1.0595. Be careful on Mondays. Again, on Monday you see this Monday, Tuesday reversal thing that’s happening that they fake you out, get you going in a certain direction on Monday and then on Tuesday they just pull the rug out from underneath you. Be very cautious. Any big move on the Euro is likely to go the other way on Tuesday and Wednesday. Right now we are above the VantagePoint TCross Long 1.0405, but again the Euro US pair will have the most immediate effect by the Fed and the dollar index. If the dollar index goes up, the Euro goes down, period. It doesn’t matter what the ECB does. If the dollar index goes down, then the Euro moves up. That’s the inner market correlation here guys, and then we just identify these key levels, 1.0405. The Euro is not in an uptrend. It’s in a corrective phase higher while we’re above the VantagePoint TCross Long respecting the fact the primary trend is down. Okay?

U.S. Dollar versus Swiss Franc

Now when we look at US Swiss Franc, once again, this will be decided by that dollar index. The Swiss Frank usually is stronger in the month of December, the normal seasonality, but right now as I’ve identified here, the seasonalities are not by a long shot are they normal, by any means. You’ve got oil prices down, equity prices down, and the dollar down, so this is not a normal December here guys like we’ve ever seen before. Not in the last 15, 20 years anyway, not that I’ve seen. Again, it’s usually the dollar that’s down in December. Stocks are well up, oils up. I don’t disagree with those seasonalities, but they are not in play at this particular time and it’s largely because of the Fed. What we’ll do is we’ll continue to monitor this, but the US Swiss Franc, you can see that basically on November the fourth when VantagePoint forecasted the dollar index was going lower, correcting lower than the US Swiss Franc followed. That is the trade.

The indicators right now are still negative and still pointing to towards further dollar weakness, but 0.9101 is the yearly opening price. Be very cautious with shorts anywhere near that particular area because again, the real seasonal pattern in the dollar is that it’s strong in January through April. If it does move lower, that would actually be a buying opportunity. What’s also somewhat comical and why using the yearly opening price is a powerful tool is because what this also tells us is that from January 1, 2022, we’re basically back to where we started and that’s why I’ve used that tool in my trading for all these many years.

British Pound versus U.S. Dollar

Now the pound dollar, once again the pound dollar, Bank of England this week, not a lot of buyers up here. Once again, you can see exactly when the pound started to move higher.

When that dollar index on November the fourth, when VantagePoint forecasted the dollar index going lower, these other currencies immediately reacted to that. The same thing is likely going to happen this coming week on Wednesday. The dollar’s either going to continue to sell off into the end of the year or it’s going to reverse on a hawkish Fed. We identify our key levels, our indicators right now are still bullish on the pound dollars, so the Bank of England could potentially help cable. There’s no question about it. That key level 1.2039 long, while above that level, but we want to get down closer to this level. When we click on our F8 in our VantagePoint software, you can see F8 is the long term crossover without the black line, just the blue line by itself, and you can see the market every single day is in contact with this blue line. We look for a breakdown of that line. That line is 1.2190 and we’ve closed at 1.2262.

Another strategy that I’ve often implemented with the VantagePoint software is having my limit orders just below 1.2190. If we break down below that, that would tell me we’re going to target lower back down to that TCross Long. For now, the indicators remain bullish. Our neural index strength, our neural index, and our predicted differences all showing some additional strength. Just be very cautious with Monday trading.

U.S. Dollar versus Japanese Yen

Now with the dollar yen, the dollar yen starting to recover here and rightfully so. Remember what this pair is. It is by definition the carry trade. Even if the fed stops hiking guys, it’s not going to matter. Japan is negative rates. The US is going to be 5%, probably minimum, so it doesn’t bode well for shorts on this pair. Now again, with that dollar index sinking, you can see that on the exact day VantagePoint forecasted the dollar index to go lower, dollar yen went lower.

The inner market correlation reigns supreme over anything. We just need a point in time as to when it’s happening. The breakdown below that TCross Long identifies this. Right now, again, another very effective strategy is to put a buy limit order just over the TCross Long. The TCross Long here coming in at 138.57. Now if you want to stay with the trend here, with the current trend, not the primary trend because the primary trend is still up. We’re above the yearly opening price at 115.09. Right? The primary trend is up. You’ve got a carry trade. You’ve got a lot of strikes against the yen here. Right?

One way we can do it is we can say, okay, when it’s ready to resume its uptrend, we can be sitting there waiting for it because we know the exact level, 138.57. You put a buy limit order, I’d say 139 or 138.70, 138.65 when it clears this predicted moving average. We’re not chasing price here guys. We’re sitting here waiting for the market to come up and resume the primary trend, which either way we assume would be in the middle of January, but Christmas could come early guys. It could be as early as Wednesday. In the alternative, you can set up cell orders just below 138.57 and then have a stop reverse ready to go long at again, around the 138.75, 138.80 area. That’s a very viable strategy. The indicators here are warning the MA Diff Cross that we potentially are going higher, but the neural index strength and the neural index at the current time are not on board. When they get on board, then we should see the dollar DN move higher.

U.S. Dollar versus Canadian Dollar

Now the US Canadian pair, once again, a lot of strikes against. The Bank of Canada did hike 50 basis points, but they’re signaling an end is near. Now the other problem for the Canadian dollar is the main correlation the Canadian has is oil and stocks. Both oil and both stocks are down. The VantagePoint forecast of US Canada going higher, despite that known seasonality and equities in oil, that’s not really happening. You can see that the Canadian dollar is being affected by that. If the Canadian dollar is to advance higher, we need stocks and oil to continue to move lower. If we’re looking at a potential recession, then there’s at least a 60 to 70% probability that it’s going to be difficult for the CAD to sell off here. We need stocks through the roof and we need oil backup above its yearly opening price.

Right now, the predicted differences are warning that it’s losing momentum, but the verified resistance high, that again, I think I talked about in last week’s weekly outlook is a little bit higher now at 1.37. The previous verified high, 1.3645. Again, this is the level up here we want to keep an eye on. Even if it breaks higher, this 1.3808, this is going to be very stiff resistance. I think shorts would be reasonable at that particular level, but that all depends on what we get from the Fed because now the Canadian dollar doesn’t have the advantage of the Bank of Canada continuing to hike when they’re saying we’re getting ready to slow this down. I think the Bank of Canada has hiked way too much to begin with.

Australian Dollar versus U.S. Dollar

Now the same thing with the Aussie and the Kiwi. They’re going to be dependent on what happens with the stock market. You can see that they have basically stalled. Right on this red line is the monthly opening price. The green line is the weekly opening price and it just couldn’t break through it.

We came down to the VantagePoint TCross Long at 0.6688 and we bounced out of there and we’re trying to turn positive. This is indirectly a positive for the S&P in the global stock markets if the Aussie can continue to advance. We see the exact same thing with the Kiwi, but the Kiwi is stronger, but also hitting into a newly formed verified resistance high at 0.6442.

New Zealand Dollar versus U.S. Dollar

This level here, you can see we have a wall of resistance including the yearly opening price at 0.6832 on the Kiwi and 0.7264 on the Aussie. If we’re talking about going into a recession here, that absolutely does not favor the Aussie or the Kiwi if they’re going into a global recession because stocks will fall and it will likely drag the Aussie, the Kiwi, and the Canadian dollar down with it. With that said, this is the VantagePoint AI Market Outlook for the week of December 12th, 2022.