Let’s Take a Multi-Timeframe Look at Wall Street’s Darling: $AAPL

A reason the S&P 500 remains merely in correction territory is largely due to $AAPL‘s weight in the index and it’s recent relative strength. So, if she falls, we all fall, and so I’d like to look at Apple on multiple timeframes.

Let’s start with some basics. Structurally, I see two things:

  1. We have overthrown a rising, bearish wedge (green structure),
  2. And the decline so far has taken on the appearance of a falling, bullish wedge (red structure)

So, that’s a mixed bag so far. The local bullish wedge may mean we’re at least due for a rally in the short-term, though perhaps the much larger bearish wedge implies we will eventually see much lower prices in the longer-term. That said, these structures only incline and do not guarantee. The bearish wedge only tells us that the long uptrend it has been in has lost momentum. It opens the possibility of a trend change, but long periods of consolidation can also produce new uptrends as well.

AAPL

Backing up a bit, I see two points of concern:

  1. We are wildly above trend (green line), and
  2. We have seen a similar period of consolidation followed by a hop before; and this price action led to the very steep decline in the period that we now refer to as “Volmageddon”

The decline back then was a 40% drop, and it brought us back to trend, and were we to endure such a revisit today, Apple would have to drop by more than 60% from its all-time high here. So that’s worth paying attention to.

AAPL

But simply looking for a mean reversion may not be good enough, as a similar anticipation may also have been had way back when:

AAPL

Sometimes as companies mature, and move from growth anticipation, to growing, to having grown, their mean reversions become almost impossible to see on long-term charts as they simply become long-term holds that distribute their profits to shareholders and have a secure business. And maybe that’s where Apple is.

That said, we are above trend and unless the 2020 catapult was the start of a new trend, we do need to be wary of a decline. And you can see, as well, on the chart just above, that the dot-com bubble bear market involved us falling below the 250-week EMA and staying there for a great deal of time. And since everyone’s in a raging froth rooting for a bear market of that scale here, let’s examine that possibility more closely. As it stands, that 250-week EMA sits between us and our recent trend line that began in 2013.

In order to revisit that trend line, we will have to pass through that long-term EMA, and in order to get to that EMA, we will need to break down from our local bearish wedge. So that seems like the key here.

And in fact, I am inclined to believe that where this green arrow in the chart below points is the most important spot in the whole stock market right now.

The confluence of technicals and importance of this stock all seem to line up at the same point in both price and time. Not only does our bearish wedge (green structure) sit there, but also our bullish wedge (red structure), and finally, it’s also exactly where the 250-day EMA sits, which we haven’t visited since the COVID crash. And so, if that spot fails, the bearish wedge will be breaking down, the bullish wedge will be failing, and Apple will have lost it’s long-term moving average as support.

And so the life or death moment for the stock market is Apple at $150.

AAPL

If that fails, I can see us making a steeper decline, perhaps not getting to trend, but perhaps partway there to the 250-week EMA. And taking the US indices with it in a steeper decline. But if that holds, I see no reason why the bull market cannot simply just go on for longer.

After all, coming out of the GFC (another crashy moment like the onset of the pandemic followed by a big Fed response), our initial tag of the 250-day EMA also took us a couple of years to get it, and it was hardly the last one we got, as we produced it and several more before having a more serious correction in 2012-2013 (I’ve noted those tags below with green arrowheads).

AAPL

In sum, Apple at $150 seems to me to be a most important point in the market. How it behaves if and when it gets there will provide us with a great deal of information. I am receiving a lot of criticism at the moment for purportedly not being bearish enough, but until I see things like this level fail, I don’t see enough reasons to simply assume in advance that it will fail. That seems irrational to me. I want the evidence first. Otherwise I risk being simply dogmatic.


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