What's Next For Apple And The S&P: This Is What The Charts Say

Following last week's relentless drop in Apple, and what appears to be a head and shoulders cap to the S&P rally which started with a double bottom in February, two questions posed most frequently by traders are i) what happens to AAPL next and ii) where does the S&P go from here.

We don't know, since fundamentals clearly dont' matter while technicals tend to be offset on virtually every step by some new and improved jawboning by central bankers, however, here is one attempt to answer that question by Bank of America's chief chartist Stephen Suttmeier.

Here are his key takeaways:

  • AAPL breaks key support at $92.50 to expose $82-76. First resistance: $92.50-95.90.
  • S&P 500 tactical head-and-shoulders top watch while below 2075-2085. Break of 2039-2033 needed to confirm this bearish setup.

Some details, first on AAPL:

Apple Inc. (AAPL) has extended lower from the bearish setup highlighted in Chart Talk: 22 Apr 2016. Yesterday’s 90-day price and volume gap down resulted in a close below support going back to mid-2014, at $92.50. While below $92.50-95.90, the bears have control, with risk to chart support at $82 and the April 2014 upside gap at $80.10- $75.87. Should AAPL regain $92.50-95.90, there is plenty of resistance at $98.71- 103.91 (downside gap) and near $108 (downtrend line and falling 200-day MA).

 

 

A double bottom started this rally in the S&P 500. Does a head-and-shoulders top end it? The S&P 500 has stalled at 2075-2085 resistance so far this week. While below this resistance, the risk is for a head-and-shoulders top off the late March-to-early May peaks. The rising 50-day MA is acting as support near 2054 and it would take a decisive loss of support at 2039-2033 to confirm the head-and-shoulders top and suggest a pullback toward 1965-1950 (top projection and February double-bottom breakout point). A decisive push above 2075-2085 is required to negate this potentially bearish tactical setup for the S&P 500.

 

Our take: now that everyone is suddenly turning bearish, especially recent cheerleader Goldman warning of a "big drop" in the days ahead (not to mention Gartman) and chartists seeing sharp downside (not just BofA but UBS recently as well), expect another major round of substantial jawboning from central bankers who can not afford a downward inflection point in the market at this point, especially now that China's record loan growth has suddenly ground to a halt.

How this may manifest itself is through a few sharp days of "forced buy-ins", leading to a spike among the most shorted stocks in the days ahead, although now that the weak hands have all covered, it will be far more difficult to unleash the kind of record squeeze that pushed the S&P500 from its February lows of 1820 to just shy of new all time highs.