AEX Index: Sell confirmed

The long term outlook has not changed since our post of 2 August (see below). Furthermore, taking a look at the near term developments, it is clearly visible that a new lower peak has been set after the failed breakout on the weekly chart. This new peak is very likely the last step before a significant sell-off commences.

The current setup is reliable and, perhaps more importantly, with a fixed stoploss point set at 577.50. After all, the earlier flush-high cannot be surpassed again (for it to remain a flush high). A poor performing banking sector and increased pressure in RDSA will most likely be the early drivers in a new bear market. Not much is needed to get tech on the sell side as well.

What to expect? A move to 544 is the least to expect. 521.40 is the first daily target with some pivots just below at 516. Weekly targets come in around the 480-cluster. In other words, lots of potential with very limited risk. An excellent short-opportunity supported by weakness is Germany, the UK and especially Southern Europe.

Taking everything into consideration, we have maxed out short-exposure (equities) divided over Germany and the AEX.

  • Primary trend: neutral
  • Outlook: negative, deep correction expected
  • Strategy: short-entry
  • Support: 554 / 516 / 480* / 455.80*
  • Resistance: 568 / 577
  • Outlook cancelled/neutralized above 577

Daily Chart AEX-Index

2 AUG 2018 – Decidedly bearish

The market has been thrown back for the third time this year by the 572 area. Even though the earlier pullbacks haven’t led to a major down trend, the situation is considerably less friendly this time. Strong downtrends are in progress in (for instance) Korea, Italy, Spain, Israel and most commodity markets. Also, increased weakness is seen in Germany and the US. Even though the AEX has been a outperformer in Europe, chances are next to zero that the index will be unaffected by developments elsewhere. Poor performance from the banking sector doesn’t help either.

We expect a drop back to at least 558.50 over the coming days. Clearing this area means the correction turns into a full swing down trend, which could easily bring prices back to 516 and the 480-cluster by Q3.  Due to aforementioned weaknesses in commodities, technology, banking and broader indices elsewhere, we have a high conviction of the scenario unfolding.

Stops can be maintained nearby: prices should now rally above the flush-high of 577 again.

  • Primary trend: neutral
  • Outlook: negative, correction expected
  • Strategy: exit-long / trading short-entry
  • Support: 558.50 / 554 / 516 / 480* / 455.80*
  • Resistance: 572
  • Outlook cancelled/neutralized above 577

Weekly Chart AEX-Index

26 MAR 2018

The outright bearish near-term outlook as described last week (see update of 19 March) is significant. Prices have formed the right shoulder of a huge weekly Head & Shoulder reversal pattern with key support at 516. Clearing this level means the start of a long-term bear market targeting 466 (pattern projection) and 455.80 (162% extension). In either case very significant down side potential. General market dynamics certainly warrant such a negative move; there is no sector strength at all and virtually all individual stocks look horrendously bearish.

We are already well positioned for a protracted negative market. Our plan is to maintain short until 466 (close 50%) and hold-short the remainder with trailing stops. We will update this position here on the website as markets develop.

  • Primary trend: negative
  • Outlook: very negative, major down trend below 516
  • Strategy: hold-short and/or short-entry
  • Support: 516 / 466* / 455.80*
  • Resistance: 532.50 / 540
  • Outlook cancelled/neutralized above 540

Weekly Chart AEX-Index