A bad market omen: Apple and Tesla denting market sentiment to start the year

US Top News and Analysis

It was a sloppy start to the year for stocks, and the steep decline in two market darlings — Apple and Tesla — is not a good omen for the market in 2023. “Here we go again, the continuation of the poor trading we’ve seen for the last months,” said Ari Wald, technical analyst at Oppenheimer. Wald said he is concerned that the market’s downward trend remains intact, leading him to think the market is at a crossroads between a bull and bear cycle. Wald issued this weekend a year-end target of 4,400 for the S & P 500. Scott Redler, partner with T3Live.com, is more pessimistic and expects a sideways year. “I’m trying to be realistic. … I don’t think the stock market makes new all time highs, and I think it’s just going to be a hard year,” said Redler. “My base case is at some point in 2023, we’re going to see the 2022 lows. I just don’t know if it’s going to happen in January, February or March, April.” He does not expect new highs until after a real rally starts again in 2024 into 2025. The S & P 500 was down as much as 1.2% on Tuesday and dipped below the key 3,800 level. It closed at 3,824. Apple’s market cap fell below $2 trillion Tuesday for the first time since May. Apple ended the session down 3.7% at $125.07, while Tesla dipped 12.2% to $108.10. Both were higher in early trading Wednesday. Redler said negative action in both Apple and Tesla impacted sentiment. “The consensus is thinking Apple could go to $118 or below, but it could go to $136 first,” he said. Meanwhile, Wald said Apple has finally joined the bear market trend. “Growth has been the culprit of the decline and continues to be pressured. It’s going to continue to pressure the stock market, while the market of stocks has shown some better action,” said Wald. “Apple fell through an important level in the past week, $129, the June low. Now the rest of growth and tech, the whole sector, fell below the June low in the fourth quarter.” Redler said the beginning of January is often a positive time because new money gets put to work from 401K plans and pensions. “Right now you have mechanical buyers. … If the market can’t go up with that, you have a lot of sellers out there,” he said. Katie Stockton, founder of Fairlead Strategies, said the action in Apple and Tesla is a warning, though she said the market could firm up in the near-term. “I think Apple has a major influence on market sentiment. It appears to be breaking down,” she said. Apple fell below the key $126.62 retracement level. If it closes there for two weeks, it will be a very negative sign, according to the chart analyst. “Below that targets $109,” she said. “We think it’s going to be a continued drag on the market no matter what happens.” Tesla touched a new 52-week low of $104.64 Tuesday. “As much as it might be overdone, it wouldn’t be something we would want to step in front of,” Stockton said. Though, she added that Tesla has much less of an impact on overall market action than Apple because of the tech giant’s huge market cap. It has also faded so much as a star market performer. As for the S & P 500, Stockton said it appears oversold in the near-term and it could get a temporary lift in early January before moving lower. “3,800 is a minor interim supportive spot between here and the 3,500 level.” Stockton also said the S & P 500 could break down several hundred points below that and reach 3,200. A decline to 3,200 would entail the broader market index falling 16% from Friday’s close.