Remember we discussed tightening the stops to lock in profits from the bull run? Now is the time to do it in case you haven’t, says Jeff Greenblatt, editor of The Fibonacci Forecaster.

Last week at this time we were dealing with the Fed and the Gann seasonal/annual change point. Since that time a lot has changed.

In 2017 markets ignored all the developing geopolitical issues and scandals. This year? Not so much. You’ll recall when the Dow Jones Industrials (DJI) hit its 610-day window in late January it came around the same time the FISA memo came out. Markets were not amused and that was the linchpin of the first major leg down.

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We know the Dow was mostly sideways until last week and started breaking to the downside on several issues. First of all, the market did not like new Fed chairman Jerome Powell talking about three rate hikes next year. When I heard that, I asked myself if they are truly attempting to pop the stock market bubble all by themselves.

Since then tech got in hot water on several fronts. Last week we knew Facebook (FB) had already gapped down based on a data mining scandal with a company called Cambridge Analytica.

But as the days wore on, the public is finding out just how deep the problem is. Last week we learned the FTC is now investigating Facebook, several representatives in Congress are closing their accounts and now Zuckerberg has been asked to appear before Congress.

Why is this important? Simply put, Facebook is one of the key market leaders in the Trump rally and now it's gone. It has likely topped for this year and a sustained rally needs its best stocks just like the Yankees need their best players to perform all the time.

Coming into the week, the market had one more out.

What is an out? When you watch the best poker players in the world on television they can compute the number of chances and the mathematical probability of pulling their hand based on the number of cards left in the deck.

For instance, if you are going for a flush and have four to a kind you know there are at least nine cards left in that suit. Let’s say you’ve seen three other cards to that suit leave the game. That means there are 6 possibilities left to pull the flush. You have six outs left. Let’s say on the last round there are 12 cards left in the deck. That means the player has a 50% chance of pulling their hand.

The stock market isn’t the same but on Monday the Dow had a major chance to bounce because it closed the week 116-180 min bars off the top. As you know, I’ve discussed for a whole month with a 26616 high, the 116-hour balance line influenced the pattern for nearly a month.

So, it responded. It was a really good reading which should have yielded more.  

Tuesday the crowd feared new data mining regulations in technology, markets sold late in the day.

On Wednesday Amazon (AMZN) got hit hard on the news Trump planned on changing Amazon’s tax treatment because he is concerned about smaller retailers being put out of business. According to Reuters, trading volume had exceeded its 10-day moving average for a full trading day.

Let’s put all this in perspective. With all the seasonal time cycles hitting maturity in the past few days, the markets needed to sustain off the Dow low on Monday. By Tuesday tech had taken out those lows which is not a good sign.

Now the market has lost two of its FAANG leader stocks. Not only that, psychology has changed 180 degrees. Many have long discussed the smorgasbord of problems either domestically or geopolitically in the past year.

This year it appears the chickens are coming home to roost. There could end up being a lot of days like Tuesday. By the way, in a bear market surprises come to the downside.

Nobody expected Trump to go after Amazon at this time with everything else swirling around. 

What about the outs? Right now, the market hinges on the prospects of the Dow holding last Friday’s low. If it can’t do that, odds increase exponentially the top will be in for the year.

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