Using the New VWAP Strategy

Where to go besides US stocks?

Follow @MrTopStep on Twitter and please share if you find our work valuable.

Every week, MrTopStep invites traders to an “Own the Close” contest where the closest guesstimate where the SPX will settle on Friday’s 4:00 cash close.

The winners get a free week's access to the MrTopStep Chat and trading tools. Enter your guess now!

Today is Fry-Day, which means it’s a free-read for everyone. If you’d like to consider upgrading to our premium membership, do so with a free 7-day trial.

Our View

There is job loss everywhere, from the small companies to the mega companies people are being laid off. This week's Fed bashing and weak economic reports gave stocks pause, but after a 1.5-day selloff, the ES goes blaring back up to the highs.


It's simple. The trillions of dollars the Fed printed and billions on the sidelines waiting to 'buy the dip’ it's no different from the days of zero borrowing cost and the old version of ‘buy the dip, don't fight the Fed.’ 

But the US is sitting on rates of more than 5% — way higher than they were back then. How does that work? It works because there has also been a shift of foreign money moving back into the US equity markets. 

When you add it all up and despite all the US woes, there is no place to go but the stock market if you want to make more than 5% on your money. At the end of the day, I guess you could say that everything is screwed up, but not our stock markets. ‘Long until wrong’ is what I say. 

Our Lean

I know most of the things I talk about may not fit your trading toolbox, but over the years they are true and tested. And sometimes it helps to see and hear things from other traders’ perspective. There’s “noise” and then there are helpful observations. 

I think PitBull would tell you that most of his stuff does not work anymore, but I have made many of my own rules and reworked some of his old ones. Either way, every trader needs a methodology, but I also believe that following patterns should be part of it. 

Yesterday I spoke about the MrTopStep 10 to 12 points under the VWAP buying rule. If you go back to Wednesday and pull up an ES chart with the VWAP and you look at the drops, you will find it worked a few times. You will also see significant up moves after. 

Yesterday the ES sold off exactly like I explained in my rule. The ES sold off through the VWAP (at 5023.50 at 11:10), traded down to 5013.75, a 9.75-point drop, and as I said it is usually worth 10 to 12 points, or it could set up a low, and it did both. The ES rallied all the way up to 5043.25 and at no point did the trade go against you.

Our Lean: Sell the early rallies and buy the pullbacks — 4480 is on TAP. Some levels for today include: 

Trading range for today: 5034 – 5068

Above: 5034, 5068, 5074, 5086 5094

Below: 5034 : 5007 - 4982 – 4974 – 4967 - 4960 - 4945 – 4936 - 4920 – 4890 – 4872 – 4860

MiM and Daily Recap 

ES Recap

After finishing on a firmer note Wednesday, the ES traded up to 5031.75 and sold off down to 5016.25 at 9:29 on Globex and opened Thursday's regular session at 5031.50 after the retail sales tumbled 0.8% in January — more than expected. The ES opened Thursday's regular session at 5018.00, then chopped its way up to 5030.00 at 9:53, sold off to the 5020.25 level, and then rallied up to a 5032.00 high at 10:26. After the high, the ES pulled back to the 5019.25 level, just 1 point below the old low and then rallied up to 5026.00 at 11:01, quickly sold off down to a new low at 5013.75 at 11:10 — which was exactly 9.75 points below the VWAP strategy I pointed out in yesterday's OP. 

After the low, the ES rallied up to 5027.75 at 11:50, pulled back to 5019.75, and then made 4 new highs up to 5043.25 at 1:34, sold off down to 5035.25, rallied up to 5044.25 at 2:10, pulled back to the 5036.25 level at 2:14 and then traded up to 5048.50 at 2:58. After the high, the ES traded back down to 5038.00 at 3:26 and traded 5038.75 as the 3:50 cash imbalance showed $615 million to buy and traded 5046.75 on the 4:00 cash close. After 4:00 the ES rallied up to a new high at 5051.75 and settled at 5050.50 on the 5:00 futures close, up 28.50 points or 0.57% on the day.

In the end, it was another big day for the ES, NQ, and RTY. In terms of the ES's overall tone, it was firm all day. In terms of the ESs overall trade, volume was steady but not large at 1.x million contracts traded.

For more info on accessing the MIM, please visit here

Guest Post

SpotGamma is one the the shining stars of the options markets. If you have never heard of them or already know of them and have never signed up for their options flow products or the SG Academy, I fully suggest you check them out and add them to your trader’s toolbox.

Here’s a snippet from them: 

Shown below is the path of our key levels on SPX this year. It has been a peculiar pattern of circling back to a 4500 Put Wall five times, while alternating back to progressively higher levels as prices marched into new highs. At this point, the now-conjoined Put Wall and Volatility Trigger™ is higher than either has been all year.

This Monday, however, the Call Wall reached its all-time high of 5100, which is 50 points higher than where it currently stands. Calls retreated a bit from their overoptimism, but based on what we know from HIRO today, they were mostly in control of rising equity prices.

Guest Post from HandelStats

From the March 2023 low they SPX gained 20.96%, culminating with a July 2023  high of 4607.07. The  ensuing pullback to hte October 27, 2023 low of 4103.78 was a decline of -10.92%. Since that October low the $SPX  gained 23.02% to the Feb 12th High of 5048.39. The largest pullback in that time was the most recent -2.54%. 

The market is headed to NEW HIGHS TODAY.

For today:

Upside: Trade and hourly close above 5031 targets 5041.50, 5044, settlement at 5047.50, then 5052.75. Hourly close above 5053.94 targets 1sd at 5077.28, then 5085.19, then 103.90.

Downside: Trade and hourly close below 5031 targets 5025.0, then -1sd at 5017.72. Hourly close below there targets 4997.85.

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!