The three-day decline in US indices has done precious little damage thus far to suggest a peak could be in place, despite rates having attempted a minor bounce. While the pullback in $AAPL could very well be problematic to the prospects of a December rally, I’ll review key areas in the pages ahead. For now, barring a breakout back above 3.91% for TNX and under 3906 for SPX, it’s right to still lean long, expecting a push up to 4100-20. This is based on Elliott-wave extensions from the October lows, and also would allow for DeMark counts to line up perfectly (potentially) on daily and weekly charts in unison. As shown below, this count remains premature on SPY’s weekly chart, and Daily charts have also failed to show sufficient upside exhaustion. Thus, while some cycles do seem to suggest a pause between next week and December expiration for US Equities, I’m unwilling to give this week’s minor consolidation too much credit, just yet. While risk/reward might appear sub-par, it’s still wrong to consider fighting our six-week uptrend without proper evidence of any real technical deterioration.
AAPL short-term cycle suggests peak could happen by mid-December, yet bounce likely into December 6th-9th
In reviewing my prior report from 9/29/22, entitled, “Here’s why AAPL bottoms next week” I discussed that AAPL was close to bottoming and should be able to rally into mid-November.
Moreover, one of the AAPL cycles I was watching with a trading day count of 81 days now looks to be able to hold up until mid-to-late next week before this starts a downward bias into 2023.
If this materializes, then I suspect Technology’s recent waning might not be able to recoup enough ground to suggest outperformance for this sector in December. However, at present, this week’s recent damage doesn’t look sufficient towards thinking AAPL needs to start this move right away.
Thus, I’m expecting that any further decline this week in AAPL likely should hold $134 initially before attempting a mild bounce. However, the month of December does appear negative for this stock’s trajectory when studying short-term cycles, which have been important in driving highs and lows for AAPL over the last year.
AAPL Technicals – The area at $134 will have utmost importance
Technically speaking the act of declining sharply from 10/28 into 11/4 and then making just a minimal bounce before turning down hard again in recent days is certainly not a technical positive. Momentum based on MACD has rolled over to negative, breaking its signal line and structurally the stock’s pattern has started to weaken.
However, this neutral pattern of the last six months remains intact at this time, so barring a break of $134, there remains no real reason to be too concerned just yet. Furthermore, given AAPL’s outsized weightings within SPX and QQQ, this level will need to be watched very carefully in the weeks ahead.
While December might prove to be a choppy month, it’s hard to be bearish until proper weakness in AAPL starts to unfold. At present, the underperformance in AAPL vs the broader market has been ongoing for the last month. Yet, on an absolute basis, it’s $134 that stands out as the key level to hold on weakness.
Conversely, the ability to regain $153.59 would be quite positive towards allowing for a period of strength in this stock.
Overall, I’m expecting another 1-2 days of possible weakness before a bounce attempt. However, failing to rally sufficiently and turning back lower starting mid-to-late next week would be a concern. Any undercut of $134 likely presents issues for US stocks given AAPL’s huge weightings in multiple indices and ETF’s.
AAPL relative chart vs Equal-weighted SPX also reveals clues
The chart below highlights a relative relationship between AAPL and the Equal-weighted SPX, shown as $RSP, Invesco’s equal-weighted SPX ETF.
Interestingly enough, while AAPL did in fact bottom on an absolute basis into late September/Mid-October before attempting a bounce, the extent of the rally has been disappointing.
Looking below, we see its relative chart on AAPL/RSP has now carved out its first five-wave decline in relative terms to the Equal-weighted SPX this year.
This recent underperformance and five-wave decline is a concern that suggests further lagging behavior is likely in AAPL. However, given that the ratio chart shows AAPL/RSP nearing former lows during its fifth wave, it’s likely in my view that AAPL should stall initially and attempt some type of a relative bounce.
Overall, this scenario lines up with the cycle chart and the absolute charts of AAPL shown above that pressing shorts in AAPL likely is premature at this time. After a bounce in AAPL into next week (which might occur for AAPL and all of Technology with a decline in $TNX), then it’s possible that this stock might weaken.
Bottom line, I’m expecting some stabilization and bounce, but a failed rally in AAPL that ends up breaking $134 either in mid-December, or more likely in early January that might result in additional weakness for Technology as a whole and serve as the “final shoe to drop” for the Technology sector. Keep an eye on $134 for AAPL.
