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.