US Stock indices remain churning near the June lows, and haven’t shown sufficient signs of bottoming, nor rallying to have a meaningful view of direction on a 1-2 day basis. One can certainly make the call for a possible Friday bounce on better-than-expected economic data with the all-important PCE Deflator coming out. However, it remains my conviction that next week is more important than Friday for stocks to put in a low. Thus, any rally to SPX 3750-3800 should be a chance to hedge for a move back down to 3600 and marginally below. Both Treasury Yields and the US Dollar should likely make a final stab at highs which would satisfy both Elliott-wave counts and DeMark exhaustion before possibly rolling over as Equities bottom right after Yom Kippur. As explained in later pages, Technology has actually performed better than might have been expected this past week which has helped Growth hold up during a very volatile time. This looks to be important, and I continue to believe that October approaching should be a time when many various asset classes experience a change in trend, with Equities and Treasuries turning higher (Yields fall) while the US Dollar takes a reprieve from its parabolic rally. The risk/reward should be favorable for Bulls to buy dips on declines into next week.
Why AAPL’s decline isn’t too meaningful
As we near the end of the 3rd quarter, one stock certainly seems to be garnering most of the attention in recent days… Apple. Following two sharp down days, most seem convinced that this is hugely damaging to the market and has the potential to bring down stocks that much more in the weeks to come. A few relevant points:
- $AAPL has held up far better than most stocks within Technology and still even after a tough week still trades roughly 9% above its June lows of $129.04.
- AAPL should definitely be considered the most important stock to keep a close eye on given its size within SPX and QQQ.
- Daily momentum is now reaching oversold levels and DeMark exhaustion looks to be two-to-three days away from forming on AAPL stock on daily charts. Note: this likely should cause a possible trend reversal in AAPL before it breaks June lows at higher levels
- AAPL is lower by 21% below its all-time highs from 1/3/22. However, its pattern has been anything but bearish in the last year, but sideways as its trading at roughly the same levels as it was last October.
- After a 243% runup in price from 2020 into early 2022, a 20% decline means far less than most would believe without any context. AAPL still trades in the upper quartile of its last few years of trading, making its recent decline a “Drop in the Bucket”
- Until/unless June lows near $129 are violated, this recent decline doesn’t have much significance technically, and should be a buying opportunity heading into next week with optimal levels to consider at $135-$138 on weakness.
AAPL cycles should bottom next week; Turn higher into mid-November
When building out a cycle composite that tracks the price of AAPL, I found that using 80 trading days as an input, along with several other cycles that share harmonicity to 80 days gave some impressive results. Given that this has huge implications for the stock market, I find it extraordinarily relevant.
Without going into huge detail on how this composite is created, I’ll simply let history speak for itself and show the next few projections for highs and lows for AAPL stock. (Note this has nothing to do with Fundamentals on AAPL whatsoever, but completely tied into prior peaks and troughs of AAPL stock price).
As can be seen in the recent past, this produced excellent results in the past, but that’s not always a great guarantee of future results as the phasing can change with cycles as we all know.
Bottom line, given just this cyclical input, there looks to be an excellent chance of AAPL bottoming by 10/8, or the end of next week. This just so happens to line up with my own cycle composite for the broader stock market to bottom within a few days. Moreover, this also lines up with AAPL’s own TD Sequential and TD Combo indicators potentially producing “13 Countdowns” which should provide a low to this decline.
Overall, I’m a buyer of AAPL next week at marginally lower levels and would use any dip under $140 to start accumulating the stock for a push up to 11/21, which is the next time that AAPL might find time-based resistance and show some selling pressure.
While AAPL has been a drag this week, Tech underperformance hasn’t been the culprit
Interestingly enough, despite the market feeling like it’s been going straight down, Technology has outperformed nearly half of the major Sectors.
Utilities has been the worst performing group on a rolling one-week basis, lower by -8.49%, while Real Estate and Energy are also lower by nearly double the amount of Technology.
This table below shows the performance of the major SPDR S&P ETF’s along with the Equal-weighted ETF’s. As can be seen, Technology in equal-weighted terms has been lower by -2.58%. Not great obviously, but certainly not nearly as bad as most sectors.
Stocks like $CDAY, $ANET, $FTNT, $PAYC, $TYL, $CDNS, $ADSK, $PYPL, $VRSN, $FFIV, $SNPS, $MU, $CTXS, $KEYS, and $INTU have all been higher over the last week.
Moreover, Technology has actually outperformed all of the major defensive sectors in the last week. Far better performance than Utilities, and also far better then REITS, or even Energy. I feel this is a major “tell” for the market. Any hint of Treasury yields starting to wane should cause Technology to move sharply higher.
At present, given thoughts on AAPL likely still pulling back a bit more, the broader Tech space and the market likely can’t be trusted to make a large move that’s sustainable until we see real evidence of AAPL bottoming out.
Overall though, AAPL’s decline is not as bad as many fear it is, and Technology has held up much better than many give it credit for in recent days. Both factors should be important reasons why markets might be in position to bottom out at a time when many least expect it.
