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The Dow Jones Industrial Average fell 166.13 points, or 1.39 percent on Friday, to close at 11,823.70. For the week, the Dow fell 48.14 points, or 0.41 percent, snapping an eight-week winning streak.  The S&P fell 23.20 points, or 1.8 percent, to close at 1,276.34. For the week, the broad market index declined 7.01 points or 0.55 percent. The S&P 500′s close below 1,280.26 means it ended below the prior eleven closes, which is a bearish sign. The minor pullback/correction has started as I anticipated.

Targets to Keep in Mind in the S&P:

Initial downside target 1250. If we bounce off this mark it would be a positive sign. BUT that would only equate to 3.8% correction from 1300. Not enough to continue the upward trend.

2nd Target 1225. Equates to 5.8% correction from 1300. This would be the ideal area of correction. If we fall below 1250, I’d buy more puts until 1225 and then at his target I’d buy calls.

3rd Target close to danger zone 1200. Equates to 5.8% correction from 1300. At this point I’d begin to buy calls at this rate and straddle with a put just in case for further correction.

Danger Zone: Anything significantly below 1180 is a significant breakdown of the bull trend. All bets are off. 

The CBOE Volatility Index, widely considered the best gauge of fear in the market, skyrocketed to nearly 24 percent, to more than 20. It was biggest daily spike in the VIX since June 4.

Stocks slumped as the protests in Egypt raised concerns the government was losing control, which would lead to instability in the region. The news was roiling markets worldwide. 3rd World social unrest has begun and will continue and spread worldwide due to higher cost of living and food inflation. A loaf of bread has been reported to cost $25 a loaf. Something we could of have never imagined. NIA reported that a loaf of bread can run up to $50-$60 a loaf in the US. Imagine the chaos around the world. Inflation is hitting 3rd world countries whom have not placed price controls. The uncertainty surrounding the events also gave investors a reason to sell after five months of solid gains, and as the Dow and S&P bumped up against key thresholds. The selling—which came from big institutions—was taking place amid significant volume, indicating more conviction in the moves. Egypt is definitely at the forefront today. Overall, political unrest is never good for the market, especially when it has to do with the Middle East. But the events in Egypt hit at a time when the market was bumping up against psychologically important benchmarks, and was beginning to “look fatigued” after rallying for some eight or nine weeks, said Brigandi, noting that the S&P 500 had been up 3 percent so far this year on top of a nearly 13 percent gain in 2010.

I think more of the fear stems from frozen trading markets and communication shut down entirely by the government. Yes that is right internet and phone lines were entirely shut down for the entire country. Something that has never been done before of this magnitude. Electronic communication was silent. This scared many and relating that this may happen in the US, as some lawmakers are demanding a “kill switch to the internet and phone line communications. Highly unlikey to happen in the US.

About a half-hour past midnight Friday morning in Egypt, the Internet went dead.  Almost simultaneously, the handful of companies that pipe the Internet into and out of Egypt went dark as protesters were gearing up for a fresh round of demonstrations calling for the end of President Hosni Mubarak’s nearly 30-year rule, experts said.

Egypt has apparently done what many technologists thought was unthinkable for any country with a major Internet economy: It unplugged itself entirely from the Internet to try and silence dissent. Experts say it’s unlikely that what’s happened in Egypt could happen in the United States because the U.S. has numerous Internet providers and ways of connecting to the Internet. Coordinating a simultaneous shutdown would be a massive undertaking.

“It can’t happen here,” said Jim Cowie, the chief technology officer and a co-founder of Renesys, a network security firm in Manchester, N.H., that studies Internet disruptions. “How many people would you have to call to shut down the U.S. Internet? Hundreds, thousands maybe? We have enough Internet here that we can have our own Internet. If you cut it off, that leads to a philosophical question: Who got cut off from the Internet, us or the rest of the world?”

In fact, there are few countries anywhere with all their central Internet connections in one place or so few places that they can be severed at the same time. But the idea of a single “kill switch” to turn the Internet on and off has seduced some American lawmakers, who have pushed for the power to shutter the Internet in a national emergency. The Internet blackout in Egypt shows that a country with strong control over its Internet providers apparently can force all of them to pull their plugs at once, something that Cowie called “almost entirely unprecedented in Internet history.” The outage sets the stage for blowback from the international community and investors. It also sets a precedent for other countries grappling with paralyzing political protests — though censoring the Internet and tampering with traffic to quash protests is nothing new.

China has long restricted what its people can see online and received renewed scrutiny for the practice when Internet search leader Google Inc. proclaimed a year ago that it would stop censoring its search results in China. In 2009, Iran disrupted Internet service to try to curb protests over disputed elections. And two years before that, Burma’s Internet was crippled when military leaders apparently took the drastic step of physically disconnecting primary communications links in major cities, a tactic that was foiled by activists armed with cell phones and satellite links.

Computer experts say what sets Egypt’s action apart is that the entire country was disconnected in an apparently coordinated effort, and that all manner of devices are affected, from mobile phones to laptops. It seems, though, that satellite phones would not be affected. Iran never took down any significant portion of their Internet connection — they knew their economy and the markets are dependent on Internet activity.

When countries are merely blocking certain sites — like Twitter or Facebook — where protesters are coordinating demonstrations, as apparently happened at first in Eqypt, protesters can use “proxy” computers to circumvent the government censors. The proxies “anonymize” traffic and bounce it to computers in other countries that send it along to the restricted sites. But when there’s no Internet at all, proxies can’t work and online communication grinds to a halt. Renesys’ network sensors showed that Egypt’s four primary Internet providers — Link Egypt, Vodafone/Raya, Telecom Egypt, Etisalat Misr — and all went dark at 12:34 a.m. Those companies shuttle all Internet traffic into and out of Egypt, though many people get their service through additional local providers with different names. Italy-based Seabone said no Internet traffic was going into or out of Egypt after 12:30 a.m. local time.

There’s no way around this with a proxy,” Cowie said. “There is literally no route. It’s as if the entire country disappeared. You can tell I’m still kind of stunned.” The technical act of turning off the Internet can be fairly straightforward. It likely requires only a simple change to the instructions for the companies’ networking equipment. Countries such as Egypt with a centralized government and a relatively small number of fiber-optic cables and other ways for the Internet to get piped in the companies that own the technologies are typically under strict licenses from the government. It’s probably a phone call that goes out to half a dozen folks who enter a line on a router configuration file and hit return. It’s like programming your TiVo you have things that are set up and you delete one. It’s not high-level programming. Twitter confirmed Tuesday that its service was being blocked in Egypt, and Facebook reported problems. Iran went through the same pattern. Initially there was some level of filtering, and as things deteriorated, the plug was pulled. It looks like Egypt might be following a similar pattern.

The ease with which Egypt cut itself also means the country can control where the outages are targeted, experts said. So its military facilities, for example, can stay online while the Internet vanishes for everybody else. Experts said it was too early to tell which, if any, facilities still have connections in Egypt. Meanwhile, a program Renesys uses that displays the percentage of each country that is connected to the Internet was showing a figure that he was still struggling to believe. Zero.