Thursday, July 23, 2009

VWAP Forecast

As I mentioned in the Rewind chat room yesterday when Jeff announced he was off fishing, I decided to play a few holes out at my favorite venue Pendleton . Rates are 50% for the month of July so if you're in the area and play, this is an incredible deal.
Here's a shot from one of my earliest golfing forays that gives new meaning to the term" taken to the cleaners".
While we wait for the markets to reach a REALLY overbought level, here's a little VWAP tell that's worked pretty nicely for forecasting the Qs overnight behavior.
And, while not all platforms provide a dynamic VWAP indicator, the good news is that http://www.freestockcharts.com/ does, and in real time, along with a host of other technicals, but alas, not the NYAD on intraday bars.
What I've tracked is the relative position of the VWAP to the price at the close. Over the past month, when price has been above VWAP at the close, the Qs have opened higher and have remained higher than the previous close over 85% of the time when the 2 minute NYAD LR7 line has been upslope. ( I use the NYAD as a proxy for momentum in the entire market, and want to see confirmation there).
The parabolics have also been in a BUY mode on each of the successful excursions and that has helped to confirm the few otherwise ambiguous signals.
Keep in mind that I've just looked at how the Qs behave with the VWAP close and the Qs have been the momentum star lately, so if you what to see how other indices or stocks perform with this little tell, I encourage you to test it out.
For those of you who can't watch the NYAD in real time or don't have access to the VWAP, just link into the site above and check the alignment of the Price and VWAP and the TSF 10/2 and LR7 of the Detrend 30 as shown on the chart above, which closely mimics the NYAD.
I'm still fiddling with the TradeStaion code to backtest the longer term viability of this overnight setup and will post the results when available.