ES VWAP Study

 The above chart shows ES (The S&P-500 E-mini futures) with the VWAP in white (center) and a +2 standard deviation (light blue top channel) as well as a minus 2 standard deviation (green lower channel0. The history covered here is almost the entirety of 2012. The dark background is normal market hours, the light tan background is the everything that falls outside of normal trading hours. ES futures trade 24 hours a day except on weekends when they close Friday at the close and open Sunday night. Don't get lost in the lines, just eyeballing the price chart shows a choppy lateral trading range; to demonstrate the choppy lateral range, from the first trading day of the New Year through yesterday at 4 p.m., the S&P-500 has gained exactly .29% (5 trading days yield a return of just over 1/4 of a percent-that's a lateral trading range). To demonstrate the volatility of the range, note how price before last night (where the blue arrow is) chopped about bouncing between -2 and +2 standard deviations. On an daily basis, you probably have felt like the market has been bullish, but in reality it has just been very volatile and has gone nowhere in 5 days-the big first 5 days of the month when funds are supposed to be flowing back into the market.

Last night represented by the light blue arrow shows the first trend that has developed, there's still little reason to support any notion of where it came from, AA's earnings and assessment of market conditions were given early credit, but Alcoa has closed today at a .11% gain, hardly the bullish assessment that should have been most beneficial to Alcoa itself.

The move last night was clean and strong, but also on very light volume. Price spent a lot of time near the +2 standard deviation top channel and only pulled back to VWAP 1 time and that was at the opening of the European markets at 3 a.m. EDT (at the red arrow). Note how such a powerful and clean trend started falling apart at the US open and broke below VWAP for the first time throughout the entire period from about 5 p.m. yesterday until 10 a.m. today (17 hours, but all in the low volume environment).

Here's a closer view of ES from about 2 a.m through today' close. ES gave up VWAP in the normal volume environment several times and on pretty heavy volume as ES either broke below VWAP or tested it as resistance. Toward the close, as I suspected, ES broke below VWAP again on increasing volume and tested VWAP and failed on the largest volume of the day; quite a difference between last night's low volume (easy to manipulate) environment and regular hours.

ES didn't look right from the start today, I mentioned it many times and many metrics that should have been much stronger like early NYSE TICK were way off the kind of gins ES put in.

I'm not sure what this is about, but it definitely seems fishy to me.

Thus far in After Hours ES has broken below today's regular hours lows, this even despite the Euro showing a slight bounce during the same time.

When something in the market is inexplicably fishy, you are best off looking at as many different metrics as you can and determine whether it is a bullish or bearish event. These are usually opportunities, at least once you figure out which way to play it. I'm leaning toward this being a bearish setup/manipulation.