US500 fails at 200 SMA; Apple falls further

Summary:

• US500 rallied last week but failed to recapture 200 day SMA

• 2766 now an important line in the sand

• Apple shares to open lower after cancelling production boost

Last week was a good one for US investors, with markets recovering after some heavy recent selling. After falling to a 7-month low last Monday the S&P500 (US500 on xStation) put together 3 consecutive daily gains of 1% or greater. This had only happened three since 2010, each time at a market low in 2011, February 2016 and June 2016. Furthermore the market has held above a rising trendline going back over 2 and a half years and bounced more than 150 points after buyers defended the key level around 2600. The rally did pause on Friday however, with a red close and the high of the day at 2766 may now take on a greater significance. This region also coincides with the 200 day SMA, and traders looking for longs would like to see the market get back above this in the not too distant future.   

The US500 has held above rising trendline going back to early 2016 but still remains below the 200 day SMA which currently resides around 2766. Source: xStation

Apple shares dropped sharply last week after a pretty downbeat assessment of their prospects during the conference call following the earnings update last week and they are called to open lower this afternoon after some more negative news. The tech giant has reportedly told its smartphone assemblers Foxconn and Pegatron to halt plans for additional production lines dedicated to the iPhone XR which hit shelves last month.  

"For the Foxconn side, it first prepared nearly 60 assembly lines for Apple's XR model, but recently uses only around 45 production lines as its top customer said it does not need to manufacture that many by now," the Nikkei quoted a source as saying.

At its iPhone launch event in September, Apple introduced the lower-cost iPhone XR, made of aluminum, along with two other models, the XS and XS Max. Five years ago, Apple cut production orders for its plastic-backed iPhone 5C a month after its launch, fueling speculation of weak demand for the model.

Shares in Apple are called to open lower this afternoon after concerns surrounding demand for it’s latest XR model phone. The stock has held up pretty well in recent weeks compared to the broader market and remains comfortably above its 200 day SMA which is not far from the breakaway gap around 195. Source: xStation

Tomorrow’s Midterm elections in the US will dominate the headlines from a political perspective and this afternoon there’s been some geopolitical news of note. The US is sanction more than 700 “individuals, entities, aircraft and vessels” in Iran as the Trump administration fulfills its pledge to ramp up pressure on the Islamic Republic over its “malign” behaviour in the Middle East. There sanctions have long been telegraphed but their imposition may actually be a little more strict than expected with Washington announcing that they will be reimposed on 50 Iranian banks. This means that it will be much harder to carry out any business with the US without the backing of local banks to finance the deals.