Brian Shannon: Using The VWAP Indicator To Gauge Market Sentiment | IBD Live

TL;DR

The market is showing bearish signals, with the volume-weighted average price indicating a potential downtrend and a lack of convincing price action for a bottom.

Transcript

[Applause] brian uh you had mentioned earlier in the show that uh you know the the lows that we have made are are very relevant to uh the the bottom of the 2020 uh bear market decline could you expound the pen up on that yeah um so i've been measuring since that low was you know really kind of uh obvious that is you know with the march what is a ma... Read More

Key Insights

• 🔈 The market has been above the volume-weighted average price since the 2020 low, but recently touched this level, indicating a potential downturn.
• 🔇 The speaker is skeptical of a quick recovery and believes that the market is still in a primary downtrend.
• 🛀 Price action has not shown any indications of a bottom, with minor bounces being outweighed by declines.
• 🔈 Stocks that are still above the volume-weighted average price from the COVID-19 low but below moving averages are likely to come down and meet the average.
• 🔊 The volume-weighted average price from the pre-COVID-19 high is another important level for market analysis.
• 🔇 The speaker remains cautious about blindly buying into weakness, even though the volume-weighted average price often serves as a significant support level.
• 💨 Shorting stocks can be challenging, as stocks tend to do the most obvious thing in the least obvious way.

Questions & Answers

Q: How has the market responded to the volume-weighted average price since the 2020 low?

The market has been consistently above the volume-weighted average price since the low point of the 2020 bear market decline, until recently when it touched this level. This suggests a potential downturn in the market.

Q: Do you believe the market will experience another V-shaped recovery?

The speaker is skeptical of another V-shaped recovery. The market is still below declining moving averages, and there is no easy monetary policy support like the one provided by the Fed during the 2020 recovery. The price action also does not show any indications of a bottom.

Q: What is the significance of the volume-weighted average price from the COVID-19 low?

The volume-weighted average price from the COVID-19 low serves as an important reference level for many stocks. If stocks are still above this average but below the moving averages, they are likely to come down and meet the volume-weighted average price.

Q: What is the purple line on the chart?

The purple line represents the volume-weighted average price from the pre-COVID-19 high. It serves as another reference level for market analysis.

Summary & Key Takeaways

• The speaker has been measuring the market since the low point of the 2020 bear market decline, and the volume-weighted average price has shown that the market has been above this level since then.

• However, the market recently touched this anchored volume-weighted average price, signaling a potential downturn. The speaker remains skeptical of a quick recovery and believes that the market is still in a primary downtrend.

• Despite seeing minor bounces, the overall trend is still downwards, as the declines have outweighed the gains. The speaker does not see any indications that the market is ready to bottom.