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I’ve been watching something in the market that’s making me cautious about long positions right now — and it has everything to do with where volume is actually concentrating versus where we think it should be.
Most traders look at price movement and assume that’s the whole story. But there’s a deeper layer that reveals whether the market is sitting on solid ground or thin ice. It comes down to understanding the relationship between VWAP and volume profile data — specifically, the 5-day point of control.
The Volume Profile Warning Signal
When I check the S&P 500 (SPY), I want to see where my VWAP sits compared to the 5-day point of control. Right now, the 5-day point of control is sitting around $636, while VWAP is down near $628. That’s a problem.
When the 5-day point of control is above VWAP, it tells us that most of the recent trading activity happened at higher price levels. Think about what that means: We’re currently trading below where most of the volume has been concentrated over the past five days.
This creates vulnerability. The market is essentially operating without a solid volume foundation underneath current prices — it’s like building a house on sand instead of bedrock.
What I’m Looking For Before Going Long
The ideal setup requires the 20-day point of control to be below the 5-day — and the 1-day point of control to be above the 5-day. Right now, we still have an imbalance between these price areas.
This imbalance is why I’m being very selective about long positions. The current volume distribution suggests vulnerability to the downside rather than strength to the upside.
When the volume profile shows this kind of poor distribution, breakouts often fail because they lack institutional backing — professional traders know where the real volume is, and right now it’s not supporting higher prices.
This is exactly the kind of analysis that keeps you out of trouble during periods when the market looks fine on the surface but is structurally weak underneath. Don’t ignore what the volume is telling you.
I hope that helps!
Roger Scott
Roger Scott Trading
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