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With the Dow down over 200 points, the market is in the danger zone.

The market opened the trading year on January 3rd at 12,221.19.

For the first time this year, we are below that number.

A case can be made for 12,000 as the next level of support but last year’s trading indicates 11,500 more likely.

Buy and hold traders are harshly reminded again that paper profits can’t buy you a paperclip.

So much was made of AAPL breaking through 600. It is now below 570.

Facebook (FB) lost over 40 Billion of it’s market cap in an Indianapolis 500 time.

And I still remain puzzled by the inconsistent performance of ETF’s that are supposed to go up when there is more fear in the market.

Take a look at the VXX.

It is supposed to gauge the fear in the market and thereby go up when the market goes down.

It is up today but it still doesn’t make sense.

Right now VXX is at 22.03 and the DOW is at 12,173.

However, on May 18th, it hit 22.79 when the DOW’s low was 12,309.63.

Is that saying there is more fear when we are above our open for the year than when we broke down into negative territory for the year?

Ask any trader and they will say it is not the case.

If anything, it just confirms that dangers of ETFs and why using them as any kind of market hedge is a risky move.

I believe the biggest ETF horror stories have yet to hit the market.

But when they do, I don’t think its you, the individual, that will take the hit.

It’s the smaller banks and hedge funds that get duped into using them just like what happened to Facebook.

NITE securities was one of the biggest losers because the big guys pick on the little guys.

I continue to watch the online brokers for good short opportunities as they sit near their lows and watch their margins shrink.

That’s not even including the forex brokers that have yet to have major regulation hit their industry which should curb trading volume substantially.

I don’t feel comfortable mention them here as their volume is too low and I am watching those more for entertainment than profit.

THE GAME PLAN

See if we can get back above 12,221 and back into positive territory for the year.
If not, near term levels of support can be found at 12,000 and 11,500.

565 days ago, I launched The Mesh Report.

It was my first step outside of the world of finance and into the news of the world.

Within days, I received a beautifully written email from Linda Brady Traynham.

It was in response to a message I sent focusing on key numbers in the stock market.

Dear Adam: 

What a nice, ironic number it is, too.  Very easy to remember. 

I’m a former analytical project report writer for Fortune  500 companies, forbidden by contract to tell you anything more, and I neither want nor need a job.  One of my triumphs was reducing a short, very senior Vice President to red-faced fury as he jumped up and down (literally) shrieking, “Who told you that?  Who told you that?!” in response to being handed a sheet of paper with three questions written on it.  Nobody told me, thank you, I figured it out all by my cute little self.  He subsided and wailed in despair, “It’s jes’ bidness, little lady, jes’ bidness.  You don’t un’erstan’.”  I understood very well, and it’s hard to bury the bodies where I won’t find them.  

I do a lot of research for my articles on the Internet and read dozens of reports/newsletters routinely every week, and I have concluded that if one had the guts to short (I have never been able to bring myself to sell something I don’t own on a vague promise to replace it eventually) a good place to sniff around would be financial advisory services.  You read that right.

As a test case, I picked one off of Google at random, and pulled up their site.  In very short order I received an offer to sell me their “flagship newsletter” for 60% off.  I’ve got an offer on my screen right now to sell me a very well known advisory service for a buck for the next quarter, as in three months, of course, and a bunch of buy-one-get-one-free.  Hmmm.  Well, gee, when I can give you at least eight probable events to beware, could it be that those who subscribe and invest are feeling wary and pressed for funds, and that open and subscribe rates are down?  

Ah, this modern generation, who failed to learn “Never let them see you sweat.” 

I read hundreds of emails of every day but found this message to be exceptional – it was magnetic.

I responded with an invitation to connect further:

“Great email and I think your ideas makes sense. Let me know if you ever want to talk!”

She responded:

ANY time, although I much prefer e-mail to the telephone because we can do that at our leisure (I’m a night owl) and telephones occupy one hand, with “chat” as my second favorite. 

Uh…on the very clear understanding that I neither want nor need a job, would you be interested in an occasional guest editorial?  Gratis, if my previous sentence isn’t perfectly clear?  I do the research and analyses for my own purposes, and writing is how I get the conclusions I have formed out of my mind.  It is a shame to waste the results.

You can find a bunch of my work archived at www.thetexasring.com and www.whiskeyandgunpowder.com.  I’m on www.hezekiahwyman.com from time to time and could be more frequently if I wanted to, since Bill Buppert and I have become great friends in the course of writing to each other sporadically for over a year. 

Signature chuckle…if I were willing to shape my words and avoid some subjects to suit the preferences of the editor I have had indications that I would be welcome on Lew Rockwell. 

I’ll write on the topic of someone else’s choice, but a fine rule in life is “If you don’t want it, don’t ask for it.”  What you’ll get is what I think, use it or not.  I’m pretty easy to get along with in terms of being edited, despite being a professional Editor, myself.  Just don’t mess with my grammar or punctuation!  Gary Gibson never touches my stuff, bless him–nobody does, now that I think of it–although once in a while he will say, “That really needs to be a two-parter.”  No problem.  I tend to be rather long-winded (my fans like it), but know full well that the key to a great project report is deleting all of the witty things I said and reducing the text to icily pragmatic advice.  I learned long, long ago that it is far easier to write more than is needed and cut than to have to figure out how to lengthen something. 

Your comment on simplifying our trading makes me feel a need to write an article on how strength is in unity, not diversity.   We need a plan better than “I’ll divide my investments among four areas so that at any given time maybe something will be in the black.”   If I do I’ll send it to you as a courtesy for first refusal because you inspired the idea. 

I’m from the old school of technical analysis, back in the days before gigantic funds began to skew what volume tells us and what we’re “reading” is what a couple of dozen managers watching each other frantically are doing to have their actions viewed as those of “prudent” men.  Now we’re into blitzkrieg trading and very questionable ethics…goodness!  I just realized I may have become a little parochial in my thinking and need to step outside of my cozy little group like this. 

I’ll go wander around your site and see what your approach is after I’ve had dinner and tossed off some thoughts on China in terms of today’s tidbits, including rising wages in China, Whammo bringing their Frisbee manufacturing back to the US, and the ramifications of ship movements in the Pacific.  One advantage of being 70 years old and having been around military men all of my life is that I am, ah, better qualified to draw inferences from scattering Tomahawk-laden submarines more or less off China’s coast.  When subs show up in the Phillipines’ Subic Bay, Diego Garcia (a dot in the Indian Ocean), and Fusan, South Korea on “courtesy visits” all on the same day, old-line Communists can read the message whether Obama meant to send one or not…and considering how independent submariners (accent is NOT on the second syllable are) are (as those who hunt alone need to be, perhaps), and those orders would come out of SUBPAC…from which we may infer that quite possibly the boys with dolphins are thinking strategically and taking advantage of war games to position a toy or two where they might be useful. 

I particularly like your crisp writing style and that you didn’t hit me with a tediously lengthy finance-omercial.  I’ll schedule listening to your radio interview happily for tomorrow afternoon because I take a couple of hours off every afternoon and my darling Charles (30 years USN, 6 1/2 have years spent under water!) and I sit outside and watch the cattle and horses come up for their evening “snack” and to be checked for condition.  More laughter…it’s calving season, and we spend a lot of time watching rear ends and udders hopefully.  Our prized Herd Leader is due to drop any time, waddling so on her breed-standard very short legs that we’re hoping she may present us with rare twin calves.  The new black Irish Dexter bull we bought so proudly last year has genes like Atilla the Hun probably did, and every calf so far has his traits stamped on him/her thoroughly.  What a wonderful life I have, to be sure–life in the country AND having places to comment on economics, politics, finances, global affairs, and the downfall of society!

Thanks for the friendly reply and stimulating my mind.  

 

Regards,

Linda Brady Traynham

Our friendship was formed from that point on.

For a year and a half, I received eloquent e-mails with words that jumped off the page and a personality that was as strong as any I have encountered.

She was one of my biggest supporters from the beginning.

Again, my very heartfelt thanks for inviting me to join your operation.   I enjoy writing for the Mesh Report enormously, I think we’ll capture the number one spot and keep it, ”the boys” are always sweet and friendly to me, and I think that I add an important dimension to what TMR stands for, a very good feeling.  All of you are welcome any time to come rough it in Texas with us.

Best wishes always, Linda

Her compliments helped to lift The Mesh Report from an idea to a daily newsletter with an audience in the hundreds of thousands.

Your vision is coming to pass, even as the preponderance of investment sites are downsizing hysterically and would regard expanding as a cockamamie idea.  I love being with a winner, so thanks again for inviting me along for the ride.

Thousands of Linda’s readers followed her to the site, eager to see what she would say next.

Many commented on her articles and she responded to every one.

Richard Cummings said it best when he wrote to Linda,

” Why have I never heard about you before?  You’re the greatest writer going now.  

Amazing! Brilliant!  Hysterically funny!!!!!.”

Here’s an example of what richard was referring to:

Oh, my, a memory.  A couple of years ago dear Charles and I were coming back to the ranch from visiting Tiffany in Irving, and the GPS took it into its electronics to route us through downtown Dallas.  We realized quickly that we were the only vehicle on the road!  We had gotten on the parade route the police had already cleared.  So…Charles just kept driving, and I did the Queen Elizabeth “screwing in a lightbulb” wave for several miles.  The crowd was nice; it waved back.  Well…we must be “somebody” even if we were driving a bright red Jeep Cherokee and pulling a Casita!

I just learned of her sudden passing and instantly realized that I had lost something that was irreplaceable.

We all did.

Linda elevated our days and brightened our minds.

Her words captured her spirit and they will live on gloriously.

And now Linda’s own words can say good bye:

P.S.  I want your immediate answer you keep to yourself:  if you could have anything in the world what would it be? 

The right answer is “for the present to continue forever.”  Mine is “Another 20 years with my dear Charles, to make enough to have a bigger ranch farther out while I still have the energy to oversee another move, and to write until the day I die.”  The middle one isn’t important unless we have TEOTWAWKI.  I think I’ll go write an article on the Caliph of Cordova, who said, about 960, roughly, “I have been victorious in war and reigned long beloved by my people.  Everything  desired by man has been mine, but the days of pure happiness in my life number…nine.”  Every one of mine is a “Caliph” day. Go have one for yourself. 

G’night, friend.

Yet, this week, MF Global did just that.

Jon Corzine, the former Governor of New Jersey and CEO of Goldman
Sachs, was appointed as CEO of MF Global in March of 2010.

In less than 2 years, he destroyed the company …

Here’s some startling numbers:

As of the firm’s filing at the end of June, it had $44.4 billion
worth of liabilities and only $1.4 billion of equity.

$700 million of customer money is now “missing” and the FBI has
launched an investigation to find the missing funds.

Even now, if you went to the MF Global website, the first words you
see are “Client Asset protection.”

When you click on that link it says:

The protection of its customers’ funds is MF Global’s paramount
concern. In this regard, the key components of the futures and
securities regulatory regimes with which MF Global must comply are
risk-based margining, capital and the segregation of customer funds.

Reuters asked our chief strategist, Todd Horwitz, to comment on the
situation and his response was simple:

“MF Global has caused the markets and all of their traders lots of
heartburn.”

From Reuters – “We’re basically putting out fires. There’s a lot of
headaches,” said one MF Global employee. “Our customers are upset,
and we’re upset that they are upset.”

Jon Corzine just got paid millions to run a firm into the ground and
only 2 things could have caused it: GREED or EGO.

Either way, both of those traits should have been held in check.

Leveraging $44.4 billion on $1.4 billion is reckless.

But, this is a great lesson for you.

When it comes to the stock market, don’t ever assume anything “can’t
happen.”

Look at NFLX.

That stock was at 300 earlier this year and closed yesterday at 80.

At 250, people thought the move was overdone.

At 200, you heard things like “oversold.”

At 150, “it had to be the bottom.”

At 110, “it was impossible for it to go lower.”

But it did.

When it comes to the stock market, technical analysis is the only
thing you can rely on because it’s emotion free.

It shows you what is happening instead of what you want to see.

It’s important to learn how to trade for yourself because there
really is nobody that cares more about your money than you do.

You got this!

Kind Regards,

Adam Mesh

P.S. Learn to trade for yourself now so you don’t have to rely on
former politicians to keep an eye on your account and a hand in your
pocket.

http://www.adammesh.com/evaluation.html

In March 2009, Adam Mesh called the bottom of the 7 month stock market sell off.

The article was published internationally and put his trading group on the map for good.

It seemed like an appropriate time to revisit that article and see what’s changed and what’s stayed the same.

It will certainly help you form your strategy for this chaotic environment.

From: MoneyNews.com

At the end of the day, the ONE thing that will cause the downfall of Wall Street will be the same thing that puts the Stock Market back on its feet.

GREED.

People became greedy and things became undone.

Right now, the best way for people to make money is betting against the market.

Eventually they will bet too heavily in that direction (GREED) and that will bring the market back up.

In fact, the bears will be leaning so far in one direction — trying to drive the stocks to zero — that there will be inevitable move in the other direction.

There will be a Short Squeeze.

Short Squeeze: “A rapid increase in the price of a stock that occurs when there is a lack of supply and an excess of demand for the stock. Short squeezes result when short sellers cover their positions on a stock. This can occur if the price has risen to a point where they simply decide to cut their losses and get out. Since covering their positions involves buying shares, the short squeeze causes an even further rise in the stock’s price, which in turn may trigger additional covering. … Short squeezes are more likely to occur in stocks with small market capitalization and small floats, although can involve large stocks and billions of dollars.” (Wikipedia)

In October of last year, Volkswagen (VOW.F) had the craziest short squeeze ever. The stock rose 800 points or 500% in two days.

For a time, it was the most valuable company in the world.

A short squeeze can be very powerful and move as if it’s a tornado — lifting everything in its path.

I first saw the sheer force of a short squeeze in 1998.

The stock was KTEL.

I was a relatively new trader and watched in disbelief as KTEL surged from three dollars to forty dollars in a day.

It was at that point that I asked the question that a trader should never ask, “How much higher can it go?”

I began to sell it short (believing it would go down).

At forty five I sold more and was overwhelmed with the speed at which it was moving.

When it hit forty-nine I was down significantly and the head trader came over to my desk.

He said in a very calm voice, “If that stock hits fifty and you are not out of that position, you are fired.”

I was out by fifty and it ended up being a very good thing — the stock went to eighty the next day.

We went out for drinks that night and the head trainer had me take a drink for every thousand I lost.

Let’s just say — I learned the hard way what a short squeeze was.

The next time it happens — and it will happen — I will be on the right side of the trade.

I’ll be riding the short squeeze tornado the same way a surfer rides a once-in-a-lifetime wave.

The key will be to identify when it is happening, what stocks it is happening in, and to take advantage of the opportunities.

Here are the three main reasons I believe a short squeeze is coming:

#1. There’s a lot of arbitrage happening in the stock market right now. Funds and banks are selling the common stock of companies (what you trade) and buying the preferred stock. The preferred stocks have been severely beaten and they are considered safer because they pay dividends, and if the companies stop paying the dividends on the preferred they lose their ability to raise money. Citigroup has stopped paying the dividends on the preferred. They were running out of money — hence the huge government bailout.

However, there is lower-tier preferred stock and people can buy that and sell the common shares, which they have been doing. That’s why the stock is at $1. At some point, the price of the common shares for many stocks (not saying Citigroup, saying others) will get so low that people begin to buy them up. The price will rise and then more people will buy them and then the people who are long the preferred will realize the dividend they are getting does not come close to covering the amount they are losing on the common they are short. Then the stocks will really shoot up.

#2. Everyone blames the downfall of the market on the subprime mortgage crisis. That began around 2003 and began to peak in 2005-2006. In July of 2003, the Dow was at 9,200. The Dow is now right around 6,700. That’s a 27 percent drop from pre-subprime level. At this point, panic and emotion are dictating what happens in the market. The end result of that scenario is a stock market rally.

#3. I’m calling it a short squeeze because it’s different than a rally. A rally would mean stocks were going up because their value was going up. I don’t think that will be the case. So many institutions have been hit so hard — so fast — that it will take a long time for stable growth to continue. The rally will happen because stocks are oversold and the bears are over-exposed. This means that even if we rise up with the strength of a tornado, we can come back down — the end result of all short squeezes.

If we were just basing decisions on reasons #1 and #2, the decision would be simple: Buy stocks and hold them for the next twenty years.

Besides the fact that I hate buying and holding stock, #3 is why we can’t do that.

To take advantage of the upcoming moves in the stock market, we will need to ride the waves up and then bail before they have a chance to bring us back down.

Then we’ll do it again.

Read 1, 2 and 3 again.

If they all make sense to you, you should be left with one question: “How do I take advantage of #3?”

The answer: EXECUTION and DISCIPLINE

Get ahead of the crowd and start taking advantage of the stock market in the way that only a trained eye can.

Let’s do this!

Adam Mesh

P.S. Get Ready Now Because There Is A Storm Coming

Adam Mesh

CEO and President, Adam Mesh Trading

www.adammesh.com

 

To take you trading to the next level, sign up for Adam’s Top Ranked Stock Market Coaching Program Today.

Either speculation on the price of oil, the additional fallout from Libya,
or another analyst making a bold prediction that is either 6 months too
late or 3 years too early. Not to mention the uncontrollable earnings
announcements!

By the time the market opens – the news has been factored in – and
you are either on the wrong side of it or trying to chase it way
too late.

Even if by some chance, the news directly impacted your stock in a
positive way, you are shell shocked that for once this finally
happened – you do nothing and watch in awe as it comes all the way
back down.

This is the Average Joe’s stock market experience.

They are stuck in a constant rut of chasing the market.

During the pre-market, China always draws special attention.

Stocks were held over night and the Chinese markets are
signaling what might be in store for our open.

I remember having big positions and staying up until 5 in the
morning so I could watch how the overseas markets were trading.

It was miserable!

And even worse – it wasn’t helping me – at all!

This went on for quite a while until something finally changed…

I stopped watching other country’s markets in the middle of the
night.

I stopped holding stocks into earnings announcements that I had
zero control over.

I stopped listening to the analysts.

I stopped all of those things and STARTED embracing what the stocks
themselves were telling me.

I started to do what Wall Street was doing instead of listening to
what they were saying.

That one change made all the difference.

Not only did it make for a better lifestyle, it made for a more
profitable one.

Now it’s your turn to stop getting bad directions and start using
the only stock market map to success there is.

http://adammesh.com/evaluation.html

Every time the market makes a big move – “analysts” are jumping
out of their seats to explain the exact reason.

As a technical trader, I don’t care about the reason – I care about the
result and what it means to my trading.

My question remains the same – what opportunity does this create for me?

With a huge spike in volatility and breaking news impacting the market
every day, the catalysts are all in place for a major market move.

Get prepared now.

I want to put you in the same position that we are in: a place where
you can pick and choose your opportunities based on an easy to learn
trading strategy.

Start now.

I just did a great interview for the Hard Asset Investor.

The focus was on the psychology of trading and how important it is to
becoming a successful trader.

I thought you would benefit from hearing it so I requested a copy of the
interview and I have it for you now.

http://www.adammesh.com/hardasset/

My goal is to train you to take advantage of the stock market in the
weeks, months and years ahead.

That starts with forming your plan of attack.

Let’s get this going.

Kind Regards,

Adam Mesh

P.S. Watch the video and then fill out the brief form so we can develop
the mentality you need to succeed in the stock market.

http://www.adammesh.com/hardasset/

It stars Ed Norton as a magician/illusionist who performs 
unbelievable tricks.

I thought of it when I wrote the title of this article.

Let me be clear though, this is not a magic trick.

This is actually a mistake that can cost you a tremendous 
amount of money.

When it’s explained it will seem obvious and you might 
question how anyone can make such a mistake.

Let me assure you it’s one of the most common mistakes in 
trading.

For the person that trades between ten and two hundred times a 
year this can be the difference between making trading a hobby 
or making it another source of income.

So how does it work?

How does thirty cents turn into three thousand dollars?

Simple.

I’ll give you a real life example.

Before a student of mine became my student, he saw how it 
could happen first hand.

Here’s what’s unbelievable, it was on a hundred shares of 
stock.

He really liked a particular stock when it was around fifty 
and thought it would go to seventy or eighty.

One day the stock traded a little below fifty and he put in a 
bid at 49.50.

Well the stock did hit 49.80 but that was as low as it would 
ever go. It stopped at that level and started going up and a 
month later he couldn’t resist any more and bought it at 70.

By the time he got in touch with me for the first time the 
stock was back at 60!

Unbelievable. Missed the ride up for twenty points (2,000 on a 
hundred shares) and then got caught in a ten point down move 
(1,000 on a hundred shares).

So there it is, the thirty cents that he wanted to save by 
buying it at 49.50 instead of 49.80 cost him three thousand 
dollars.

This one trade served as the basis for our entire lesson.

If you’re looking for twenty or thirty points then why should 
thirty cents make a difference?

Even more to the point, if you have a bid in that’s not 
getting hit then that is a sign that you are right about the 
stock!

It is strong and that’s why your bid is not getting hit.

When I am bidding for a stock and the bids are not getting 
touched that makes me want the stock even more.

I have no problem paying up for it.

Don’t let pennies stop you from making points.

See how this can apply to your own trading and maybe you can 
create your own market magic!

All the best,

Adam Mesh

Have you ever seen the movie, The Illusionist?

It stars Ed Norton as a magician/illusionist who performs 
unbelievable tricks.

I thought of it when I wrote the title of this article.

Let me be clear though, this is not a magic trick.

This is actually a mistake that can cost you a tremendous 
amount of money.

When it’s explained it will seem obvious and you might 
question how anyone can make such a mistake.

Let me assure you it’s one of the most common mistakes in 
trading.

For the person that trades between ten and two hundred times a 
year this can be the difference between making trading a hobby 
or making it another source of income.

So how does it work?

How does thirty cents turn into three thousand dollars?

Simple.

I’ll give you a real life example.

Before a student of mine became my student, he saw how it 
could happen first hand.

Here’s what’s unbelievable, it was on a hundred shares of 
stock.

He really liked a particular stock when it was around fifty 
and thought it would go to seventy or eighty.

One day the stock traded a little below fifty and he put in a 
bid at 49.50.

Well the stock did hit 49.80 but that was as low as it would 
ever go. It stopped at that level and started going up and a 
month later he couldn’t resist any more and bought it at 70.

By the time he got in touch with me for the first time the 
stock was back at 60!

Unbelievable. Missed the ride up for twenty points (2,000 on a 
hundred shares) and then got caught in a ten point down move 
(1,000 on a hundred shares).

So there it is, the thirty cents that he wanted to save by 
buying it at 49.50 instead of 49.80 cost him three thousand 
dollars.

This one trade served as the basis for our entire lesson.

If you’re looking for twenty or thirty points then why should 
thirty cents make a difference?

Even more to the point, if you have a bid in that’s not 
getting hit then that is a sign that you are right about the 
stock!

It is strong and that’s why your bid is not getting hit.

When I am bidding for a stock and the bids are not getting 
touched that makes me want the stock even more.

I have no problem paying up for it.

Don’t let pennies stop you from making points.

See how this can apply to your own trading and maybe you can 
create your own market magic!

All the best,

Adam Mesh

P.S. I’m looking to coach 10 hungry individuals who want to 
become financially free trading the markets. If you qualify 
to work with me, I’ll take you step by step and show you the 
exact steps I took to become a stock market millionaire.

See if you qualify here!