Institutional investors use volume weighted average price (VWAP) as a gauge for position entry efficiency.  Accordingly, the prior day’s closing VWAP level is an important reference point throughout the next day, much like a pivot.  We have drawn arrows on the ES chart below to illustrate how closing VWAP (cyan) can serve as powerful support and resistance throughout the day, oftentimes marking the absolute high or the low.  Nearly all of today’s day-session price action was contained by the prior day’s VWAP.

We have updated the free TradeStation Anchored VWAP Bands indicator on our website to include this new feature.

Because institutional investors, such as mutual funds, are measured against their previous monthly and quarterly and yearly performance, and VWAP measures average price paid over a period, these other closing VWAP time frames may prove valuable as well.

9:56 am EDT:  Chicago Purchasing Mgr Index disappointed strongly and the ES is descending as quickly as it rose Monday.  There may not be many good entry opportunities as price does not want to retrace much.  As we write, daily S2 has provided support.  Aggressive shorts can enter at 1048.25 or, more conservatively, 1052.50 to 1054.00.   The ES needs to get back above 1060.00 for us to look for longs again (unlikely).   We are not bottom pickers here until all the way down to 1033 to 1037, which is the ideal swing long area into Friday’s Employment report.

The Precise Take – ES maintaining strength as quarter ends

Leaders Analysis:   The USD finally broke again overnight and gold is up proportionately, back over 1000.  30 Year T-Bond futures are still hanging around highs, which equity longs will want to see rejected to allow an easy pass to new highs.  If 122 is materially broken to the upside in T-Bonds, there will likely be significant short covering that will draw money into Treasuries and compete more seriously with stocks. 

Medium Term Analysis:  Tomorrow (Thursday) is a monster news day, with a good potential for disappointment in one or more of the four major market moving reports.  It may take a fancifully rosy Employment Situation report on Friday to boost equities to new highs.  If the current value area is rejected and the ES returns to the lower value area centered around 1042.50, we would expect it to be supported at least into Friday’s Employment report.

Trading Today:  As we write, yesterday’s market profile point of control of 1056.00 served as support after a slightly negative ADP Employment Report and Q2 GDP was subsequently revised to be less negative, which has given the ES a boost.  However, the 1063.00 market profile point of control is still being rejected.  Longs need to…

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