Chart analysts say the breakdown in Apple's stock may signal a market bottom is near

Published Fri, Sep 30 20226:44 AM EDT

The pullback in Apple 's stock over the last two trading days may indicate that a bottom for this brutal bear market is on the horizon, according to some analysts who study charts. "I think this bear market isn't over until the best names, the ones that everyone felt was a defensive safe haven, get hit," said Strategas partner Chris Verrone. Amid this year's market sell-off, investors and analysts alike have come to view Apple's stock as a port in the storm, given its relative outperformance against the broader market. Shares of Apple are down about 22% this year and sit about 10% off June's trough compared to the S & P 500, which has shed about 24% this year and hit a new bear market low Thursday. Over the last two days, that narrative has shifted as the stock plummeted nearly more than 6%. Apple's stock shed 1.3% on Wednesday after a report that it's bailing on plans to raise production on its new iPhone, and almost 5% Thursday following a downgrade to neutral from Bank of America . While the sharp sell-off in the tech bellwether may be cause for concern, some analysts say it may also be a sign that a market bottom is in sight. "Usually the weakest ones get hit first, and then the intermediate ones get hit and then the strongest ones get hit," said JC O'Hara of MKM Partners. "Maybe you could make a case that you're closer to the end because Apple — which held up the best relative — is coming under pressure." Apple is the largest stock in the S & P 500, making up more than 7% of the benchmark index. That means large swings in the stock have an outsized impact on the index, and can even mask underlying weakness, O'Hara said. At the market's recent August high, the iPhone maker's stock stood less than 3% below its 52-week high and close to breaking a new record — while the average stock traded more than 18% off the S & P's top. "The S & P 500, without Apple, would have broken already," O'Hara said. "If Apple were to test its June low, that would mean the largest and most influential stock dropping 10%. That would put enormous downward pressure on the markets." Oppenheimer's Ari Wald agrees that a selloff in Apple often signals that stock markets are nearing a bottom, given that the stock is often sold during the later stages of capitulation. That said, a bottom isn't in just yet. The bear market has already worked its way through speculative tech and bellwethers like Microsoft, Amazon and Google, which sit at least 32% off their highs. The last domino to fall in this case is Apple, even though more challenges remain in the near term, said Verrone. To be sure, analysts including Fundtstrat's Mark Newton are skeptical of whether much can be deduced from just two days of subpar trading. "I don't view this as being Apple's down two days, so the whole market is going to correct further another 20% to 30%," he said, adding that while the stock has weakened more so than its peers, he expects it to bottom in the next few days.