Who is bullying the U.S. stock market?

It’s popular to say that Goldman Sachs, J.P. Morgan Chase, the PPT (Plunge Protection Team) or the Federal Reserve, because all engage in shenanigans we’ll never fully know.

But they don’t bully the stock market. Apple does.

Apple Inc. AAPL, -3.17% is one of three stocks racing to become the first trillion-dollar company. Unlike Amazon.com Inc. AMZN, -1.78% and Alphabet Inc. GOOG, -2.37% (the other two contenders), Apple is the only stock to be included in all three of the following: the Nasdaq 100 Index NDX, -1.29% , the S&P 500 Index SPX, -1.11% and the Dow Jones Industrial Average DJIA, -0.87%

In fact, Apple is more than just included — it rules the roost. It is the biggest component of the Nasdaq 100 (11.6%), the S&P 500 (3.6%) and the Dow Jones Industrial Average (4.6%).

SpyETF

At one point, Apple was up as much as 35% this year and accounted for 10% to 20% of the 2017 returns of the S&P 500 or Dow Jones Industrial Average.

Apple is truly the big dog of the U.S. stock market. When the stock coughs, U.S. indices catch a cold.

Support and resistance

Buying or owning the Nasdaq (and, by extension, the S&P 500 and Dow Jones Industrial Average) without knowing what’s going on with Apple is like planning a Caribbean vacation without knowing when hurricane season is.

For those who don’t have the time to keep up with projections for the iPhone, iPad and other product sales or read the tea levels on whether earnings will disappoint or not, and then project how Wall Street may react, here is a simple but effective way to assess Apple:

The chart below shows some basic support and resistance levels. In mid-May, Apple ran into black trend channel resistance and peeled back.

iSPYETF

This trend channel is one reason why we considered the short-term upside potential for Apple, the Nasdaq and S&P 500 to be limited.

According to the May 21 Profit Radar Report: “The Nasdaq 100 may be close to where the S&P 500 was in December 2016 and March 2017: at peak momentum. Stocks almost never (permanently) top at peak momentum. Therefore, the Nasdaq 100 appears to be close to a correctional period somewhat similar to what the S&P experienced since March 1.”

Support for Apple is around $140 and $135. Currently, Apple is floating in a “technical vacuum,” above support and below resistance.

Stock seasonality

Apple has been on a 13-year tear, so seasonality is overall bullish. There are, however, a few seasonal weak spots, one of them in mid-July.

iSPYETF

Seasonality for individual stocks is not a critically important factor, but it is something to keep in mind.

Summary

At the current price of around $145, Apple is above support and below resistance. A move to $135-$140 would bring Apple closer to a buy signal, while a move to $160 (or higher) would increase downside risk considerably.

Interestingly, the S&P 500, just like Apple, is in limbo now. Once the S&P 500 snaps out of its range, it is likely to follow the roadmap drawn by the most powerful market indicators.

Simon Maierhofer is the founder of iSPYETF.