Based on this short article, I'm going to guess it's either waterlogged or not getting enough potassium. It is pretty dense soil and I haven't checked the pH recently (though I should--also have blueberries growing nearby).
I hope you'll get much better comments but so far there's nothing so to fill the void:
I kept alive a scrawny apple tree in a large pot on my apartment balcony for 20 years, because it grew from a Gala apple seed planted by my daughter in preschool. (Obviously it didn't make Gala apples, but it made some pretty flowers and tiny crabapples that were sweeter than you'd expect.)
I learned that apple trees are prone to fungus and really like good drainage. If I were doing it again I'd use something lighter than potting soil, like Orchid or even Desert Mix. Not sure how that translates to in-the-ground gardening but I do think you're right about it being waterlogged. I'm sure you could dig in something around it to let more dry air into the soil and let excess water drain.
I have a blueberry bush too, and it's much hardier.
