Info!! Gauging The Market's Intraday Forcefulness As Well As Weakness Amongst Vwap

The volume-weighted average toll for a stock or index (VWAP) is a useful statistic for marketplace makers as well as intraday traders, every bit it provides a benchmark for electrical flow marketplace price.  In a rigid market, a stock or index volition consistently merchandise inwards a higher house its VWAP as well as VWAP volition convey a rising slope.  In a weak market, nosotros run into the opposite.  In non-trending markets, it's non at all odd to run into a stock or index oscillate around its VWAP.

If y'all click on the nautical chart above, you'll run into a unlike application of VWAP.  Here we're looking at SPY on a five-minute footing through the 24-hour interval session for 8/7/2014 (blue line).  The blood-red trace of piece of job represents the percent of NYSE stocks trading inwards a higher house their day's VWAP.  The greenish trace of piece of job represents the percent of Dow Jones Industrial Stocks trading inwards a higher house their day's VWAP.  (Data come upwards from the e-Signal platform).

Generally, inwards an uptrend, we'll run into to a greater extent than than 50% of stocks trading inwards a higher house their VWAPs.  In a downtrend, such every bit nosotros had inwards today's market, nosotros volition larn out persistent readings below 50%.  More rangebound markets volition tend to oscillate around that 50%-ish level, oftentimes reflecting a grade of sector rotation.

By comparison the percent of NYSE stocks trading inwards a higher house their VWAP alongside the percent of Dow stocks trading inwards a higher house their VWAP nosotros tin larn out a feel for how the wide marketplace is trading relative to the large caps.  From relatively early on inwards the session, nosotros tin run into that large caps were weaker than the wide market.  That is useful data if you're structuring a brusk merchandise or a relative one.

The primary value of the VWAP figures for the active trader is to attention them remain on the correct side of the market.  Even when nosotros bounced during the afternoon yesterday, the vast bulk of shares stayed below their average prices.  When VWAPs are declining as well as stock prices are staying below those fifty-fifty on bounces, that's a pretty proficient indication of weakness on the 24-hour interval timeframe.

Further Reading:  The NYSE TICK Environment
.