What AAPL investors need to watch as China’s iPhone Ban accelerates

Technically trends are bullish but extended in both Equities and Treasuries, but despite recent overbought conditions, markets haven’t shown enough proof to argue that any kind of pullback is getting underway.  The broad-based participation higher in multiple sectors in the last month is certainly a technical positive heading into 2024.   Near-term risk/reward doesn’t seem favorable for those with timeframes less than two to three months, with NDX, and SPX right near Bull market peaks.  However, consolidation would offer attractive risk/reward opportunities in the week ahead.

Markets stalled a bit on Friday, as SPX and NDX both largely held levels near prior all-time highs, while the strength in the Russell 2000 also stalled out as prices closed under prior peaks from July 2023.  Though the NASDAQ 100 index technically did achieve a new all-time high daily and weekly close, prices remain under 2021 intra-week highs. US Equities have now run higher for seven straight weeks, which signifies the longest trend in over five years. 

10 of 11 sectors fell in trading on Friday, and it was merely the act of XLK -0.34%  turning in +0.50% gains that helped Technology finish positive while all other sectors fell in trading on negative breadth of roughly 2/1 negative.

As shown below, the act of having achieved a record close still isn’t sufficient to argue imminent follow-through from current levels.  The NASDAQ 100 index did manage to finish above November 2021 daily and closing records with its 16623.44 finish.

However, daily and weekly DeMark 13 countdown exhaustion is now present on NDX charts, and given China’s iPhone ban having accelerated this week, AAPL very well could stall out near its own all-time high levels.  Given that this stock represents the highest weighting of any single stock name within SPX and QQQ, keeping a close eye on AAPL is always important.

NASDAQ 100 Index

AAPL could stall out near all-time high territory as China’s iPhone Ban accelerates across government

Expiration Friday concluded with some potential market moving news for AAPL, as Bloomberg reported that the crackdown on AAPL’s iPhone seems to be spreading.

The broader, coordinated effort of multiple state firms and government departments across at least eight provinces instructed employees in the last month to start carrying local brands of phones, which is a ramping up of the September directive, when just a few agencies began telling their staff to leave any foreign devices at home.

Technically speaking, AAPL remains in good shape, having recently bounced to test its prior all-time highs at $198.23.  This represents a gain of over 30 points from its late October 2023 close, or roughly 18%.

At current levels, a few warning signs have cropped up that could allow this to stall in the short run.  First, negative momentum divergence has appeared with momentum having failed to confirm AAPL’s most recent runup into mid-December.  AAPL’s RSI peaked out in overbought levels on/near 11/20/23.  Second, counter-trend exhaustion indicators per TD Sequential have just appeared for the first time on this rally since October.  Third, the area from $197-$198 is a prominent area of resistance given that AAPL is revisiting this key level for the first time since July. 

Overall, given that both NDX as well as AAPL show these counter-trend DeMark-based exhaustion signals, it would make sense that AAPL might pull back to $190 before pushing back to new highs.   Any decline under $190 into the first few months of the year would find strong support near its 50% retracement area at $183 which is thought to represent significant support.

Overall, key levels for investors to watch lie at $198.23 its former intra-week high from July 2023.  On the downside, the early December intra-day lows of $187.45 are important along with $183.  Only a move down under $165 would serve to shake its current uptrend, and this is not expected into year-end, nor in 2024. 

Resistance targets upon AAPL eventually breaking out above $198 lie near $211, with intermediate-term resistance targets found at $239.

Apple Equity

IWM has found resistance near prior peaks

Russell 2000 has enjoyed a rally of over 23% since late October, and now lies right near peaks from July and January 2023 along with highs achieved last August near similar levels.

While this week’s close at $197.04 did represent a new weekly high close for 2023, it failed to break out above prior peaks in a way that would suggest imminent upside acceleration.

Overall, NDX, SPX and IWM all lie near prominent resistance near prior highs. 

Given the acceleration in price and momentum in recent weeks, I do expect that Russell 2000’s Ishares ETF will exceed this resistance in January of 2024.  This would likely kick off a greater rally in Small-caps.  At present, IWM lies near a critical area, and I find it difficult to label this week’s rally a breakout. 

Support should materialize near $185 on weakness and is considered a strong area of support where IWM would be quite attractive.

Russell 2000 ETF

IWM in ratio to IWB has not broken out, despite recent strength

One key ratio chart which I find helpful when trying to make decisions on over/underweighting various styles, or sectors involves using relative charts of an average vs another benchmark.

In this case, IWM, the Russell 2k ETF, is plotted relative to IWB -0.25% , the Russell 1000 ETF.

While this past week’s outperformance has been impressive, the ratio chart did not rally back above prior lows from 2020 nor above its current downtrend.

Thus, this move in the Russell 2000 is thought to be a work in progress.  Once greater evidence of both relative breakouts occur coinciding with IWM getting back above $200 on a weekly closing basis, it will be easier to be intermediate-term bullish on Small-caps expecting immediate follow-through higher.

I suspect that any hint of US Treasury yields turning back higher for a bounce might result in underperformance for IWM.

Russel 2000 ETF / Russell 1000 ETF Ratio