Chart show's NQ Monthly price 2002 - present.
Is it reasonable to suggest NQ may drop to it's 10yr VWAP, to 5074?
Is this certain?
No. Because:
At the end of VWAP's period (10yr, 1yr, Q, M, W, D, etc) its calculation starts afresh with volume=0. For example the red dotted 1yr VWAP gaps to price (up/down) every January 1st. Therefor alternative outcomes include:
1. Price remains 2.5 SD above VWAP until Jan 1st 2030, then gaps-to price.
2. If price comes down slowly over a multi period, the 10yr VWAP will rise (as lower prices get averaged in) until they meet far above 5000.
Notes:
NQ futures, first contract continuous.
VWAP's SD may not be valid at this TF. The 10yr VWAP's lower band quickly drops below zero. That said, the +2.5 band has been very useful over the last 12 years.
Finding a useful solution is left as an exercise for the reader. (Hint: Percentage)
- Red dotted line: 1 year VWAP +/- 2.5 SD https://www.investopedia.com/terms/v/vwap.asp
- White dotted line: 10yr VWAP, and the white band is+2.5 SD
- 10yr VWAP today is at 5074 (thus the title) while price
Is it reasonable to suggest NQ may drop to it's 10yr VWAP, to 5074?
- Yes, it's a plausible expectation because.
- It's happened before (2002 and 2008).
- Every year price has followed its 10yr VWAP, albeit from 2.5 SD above.
- There's a fundamental narrative that allows for just such a drop.
Is this certain?
No. Because:
At the end of VWAP's period (10yr, 1yr, Q, M, W, D, etc) its calculation starts afresh with volume=0. For example the red dotted 1yr VWAP gaps to price (up/down) every January 1st. Therefor alternative outcomes include:
1. Price remains 2.5 SD above VWAP until Jan 1st 2030, then gaps-to price.
2. If price comes down slowly over a multi period, the 10yr VWAP will rise (as lower prices get averaged in) until they meet far above 5000.
Notes:
NQ futures, first contract continuous.
VWAP's SD may not be valid at this TF. The 10yr VWAP's lower band quickly drops below zero. That said, the +2.5 band has been very useful over the last 12 years.
Finding a useful solution is left as an exercise for the reader. (Hint: Percentage)