The Frustration Index
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On Friday, the Nasdaq gapped lower and began to
chop around. It then mounted a decent rally but gave up most of it
going into the close. This market just can’t seem to get going.
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The S&P ended flat after a choppy day.
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In momentum–based
swing trading, momentum is key. And, it’s nearly impossible to find.
When you do a find a trend and a setup, the market chops just enough
to stop you out before the trend resumes. I’m thinking about building
an indicator called the “frustration index.“
The more I curse the market, the higher the index. And, when the index
is high, I shouldn’t trade. In all seriousness, this is worst
environment that I can remember.Â
So what do we do? The
fact that the indices can’t seem to get going from this oversold
condition,
combined with low VIX readings,
suggests that the market is vulnerable. However, its so choppy that
both sides could probably be played until proven otherwise. Just keep
it light,
as the frustration index is hitting all time highs.
Looking to potential
setups, MRO
Software (MROI),
mentioned Thursday night, still looks like it has the potential to
rally out of its first pullback since breaking out of a base.
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On the short side,
Teradyne (TER),
mentioned Thursday night and in the vulnerable semi equipment makers,
still looks like it has the potential to continue its rollover out of
a Bow Tie.
ABGX Follow Up
Lately, I have been
doing a walk through on Abgenix (ABGX),
a Bow Tie short mentioned recently. If you haven’t already done so,
you might want to read the archives for the past two weeks. When I
last left off, I had discussed that the protective trailing stop was
hit but the stock still looked interesting. Assuming a re-entry below
Thursday’s low, the protective stop could then be placed above the
recent highs (a). If the downtrend truly remains intact, this level
should not be violated. Let’s see what happens.
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Best of luck with
your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….Landry
writes clear, lucid prose, and uses lots of examples. I like this book
because of Landry’s simple approach. He shows many useful trading
ideas instead of trading theory….. It’s a good introduction for a
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