U.S. Equities Update: Apple (AAPL) & The Fed In Focus

S&P 500 Futures: (2-3 Days)  Neutral

We are neutral on the S&P 500 () until 2400ish (or 2395 on futures) is exceeded or 2377 is breached. Apple’s earnings (NASDAQ:AAPL) and the Federal Reserve statement will be the buzz of the day.

The last 5 days have been lifeless, showing very little overall volatility and this hasn’t shown much signs of changing. Any drawdown likely doesn’t get below 2368 on futures before moving back to new all-time highs.

Technical Thoughts

Apple’s (AAPL) after hours drop (earnings reaction) might result in at least minor weakness for the indices (if not recouped quickly) and particularly for Technology. To be fair, Tech has been in need of at least a minor pullback after its torrential run higher.

The S&P 500 though has shown little to no evidence of wanting to peak from a pure price perspective, outside of simply moving sideways over the last five trading days.  Tuesday’s close was less than five points from last week’s 4/25 close, as well as the close from 3/1/17, the day that started this massive consolidation following the Election run-up.  While the breakout in late April helped to resolve this pattern in a bullish manner, we haven’t yet broken out yet, whether looking at SPX, nor DJIA, nor TRAN.  Russell 2k’s breakout back to new highs proved remarkably short-lived and it promptly has moved right back into the base.

Overall, we’re left with very much the same picture we’ve seen in the last week:  Little to no change in Treasury yields, the Dollar index, or Equities. 

What HAS changed in the past couple weeks?  We’ve started to see meaningful strength in Healthcare, and now Industrials also seem to be following suit, given the recent breakouts in the Rails which followed Aerospace & Defense.  Now, Airlines seem to be the next group to make their move, on the heels of XAL’s push higher to levels that would constitute new all-time weekly closing highs for this index.   Four of the top 10 performers in the SPX Tuesdaywere Airlines, all up by more than 4% on the day.

Chart Spotlight – Apple (AAPL)

Apple’s earnings report seems to have been carefully scrutinized and discussed by many, and its important to put the fundamental news in context given how the stock has traded over the last few years.  As Daily and weekly charts show, AAPL has had a historical pattern of 26-27 week turns which now favor a possible turning point near 5/17, or about 2-3 weeks away, which would also come within an exact one-year anniversary of last year’s lows.  Over the last couple weeks, signs of minor negative divergence have been present, while TD Sell Setups occurred on Tuesday’s close, warning of a possible slowdown in the recent rally.   For now, pullbacks could find support near $144 which would represent the recent area of the base where AAPL broke out.   Until/unless the stock breaks $140, pullbacks would be used to buy for a push back to new high territory into mid-May.

More on the markets…
Outside of watching sector rotation, we’ve begun to see some real deterioration in Crude oil, which looks to be breaking down under the trend which has guided support in WTI since last August,  nine months ago.  While a weekly close would bring about more conviction than just one day, one should hold off on buying dips here until price can prove itself.  If not, pullbacks under $47.50 would be a lot more serious for Crude.  Energy stocks, for one, continue to fail in their efforts to try to bottom out.  OIH has been particularly weak, much more so than XOP, and is now within striking distance of last September’s lows just above $26.  This represents about a 61.8% Fibonacci retracement for OIH, while a 50% time retracement to its 327 day rally last year into mid-December would potentially bottom out on 5/24.  So buying OIH when both price and time retracements are near could offer better probability for success, and should be watched carefully.  Bottom line.  Additional weakness looks likely for OIH, and WTI looks to have just violated key support and will need to reverse very quickly to avoid a move down to the low $40’s.

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Twitter:  @MarkNewtonCMT

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.