Market Update: S&P 500 and the Election Volume-Weighted Average Price (VWAP)

The S&P 500 has had a pretty good bounce since the election, and I’ve been monitoring a key area of focus with a technical indicator called the Anchored VWAP (Volume-Weighted Average Price).

In simple terms, anchored VWAP is a tool that combines price and volume to show the average price at which an asset has traded over a specific period. Anchoring it to a significant event, such as the recent election bounce, can help us understand where investors and traders are positioning themselves after this crucial moment.

Currently, the S&P 500 hovers near the anchored VWAP level established from the election breakout. This line serves as a form of support, where buyers and sellers often struggle to gain control. Currently, buyers are winning. As the market falls, more buyers than sellers step in and push the price back up. As you can see in the chart above, that red line is the VWAP from the opening bounce Wednesday after the election. Each “candle” represents one hour of trading.

The market has hit this line and level of support three times and has been able to bounce off and stay above it. Breaking below this level MAY suggest that we could see a pullback in the market, as this would mean there are now more sellers than buyers. However, we believe that such a drop will likely be contained and does not signal the beginning of a significant downturn at this time.

While monitoring these developments is essential, we do not use any one indicator as a buy/sell signal.

Markets are very dynamic, and while technical indicators like anchored VWAP provide valuable insights, they are only one piece of the broader economic picture. We use this tool to get an indication of investor sentiment and uncover intermediate-term moves in the market.

We’ll keep you updated as things develop heading into the year.

Talk soon!

Shean