Apple's Triple Break
On the week Apple shares fell below their 200-week moving average for the first time since September 17, 2013, they also fell below their 55-week MA for the first time since October 2013. Apple has also lost 7% over the last 30 days, underperforming 25 of the 30 shares in the Dow Jones Industrials Average. The stock makes up 4% of the S&P500, 13% of the Nasdaq 100 and 7% of the DJIA.
The 30-member DJIA has now traded below its 200-day MA for 9 consecutive days, longer than the 8-day period during the fateful week of mid-October 2014-- the longest period since November 2012. 2012 was also the year when Apple peaked in September of that year before falling a remarkable 45% over the ensuing 7 months, losses attributed to slowing growth for iphones and rising competition from Samsung.
The China story remains the most popular scapegoat for a rapidly growing company in need of persistent momentum growth The $4 trillion wiped out over the last 7 weeks from China's stock market will be difficult for Chinese retail investors to regain. A Chinese soft landing is highly probably, but a 30% decline in the Shanghai Composite index in a matter of three weeks –leveraged—will eat into wealth for a long time. Any rebound is likely to be capitalized on by fund managers and Chinese smart money than by retail traders.
We expect 2,069 and $105 to be the next target for the S&P500 and Apple shares. Until we get there, the China story is unlikely to have changed, but the ever-developing plot of Fed hike expectations ought to be revisited.
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