Last Tuesday we looked at the big technical reversal signals that formed in Apple, Microsoft and Amazon. That was a clear warning signal flashing, but few saw it. And because these big heavy weights contribute heavily to the indices, both the S&P 500 and the Nasdaq had reversal signals on the same day.
On Friday, we revisited the important charts on these tech stocks, and said "those bearish signals still look very valid and so does the outlook for another run toward the lows of February."
Price often leads fundamentals.
With that, today we get a fresh catalyst to accelerate the downside in broader stocks. And this catalyst falls within the big theme we've been talking about over the past year: increased regulatory scrutiny on the big tech giants.
In this case, it's Facebook falling into the crosshairs.
This simple chart has now predicted the broader market sell-off of the past four days.
Here's the chart we looked at on Tuesday...
And here's the chart today ...
Heading into the end of last year, we talked about the regulatory scrutiny starting to emerge toward the big tech giants (Facebook, Apple, Amazon, Netflix, Google... Tesla, Uber, Airbnb...) and the risk that the very hot run they've had "could be coming to an end."
These companies have benefited from a formula of favor from the Obama administration, which included regulatory advantages and in the case of Tesla, outright government funding. That created a "winner takes all" environment where this group of startups and loss-laden ventures, some with questionable business models, were able to amass war chests of capital, sidestep enduring laws, and operate without the constraints of liabilities (including taxes, in some cases) that burdened its competitors.
They have set out to disrupt industries but have done so with unfair advantages. And in the process, they've nearly destroyed industries. Meanwhile, the power transfer into so few hands has quickly become a big threat. I suspect it won't go unchecked for much longer. And as we've discussed, this creates the prospects for a big bounce back in the industries that have been crushed by the internet giants.
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