Dutch AEX Technicals: Sell signal, heading towards 302!
During the last uptrend, some indices offered hints they were relatively stronger than the others. I thought that the AEX - the Amsterdam Exchange - was one of those. Last week, however, we saw that they were one of the first European indices to break out of its "top" formation and generate a sell signa. Not being a 100 % sure what to make of the relative momentum to others, my short term downtrend target is 302 and that's what matters to me.
Prerequisites: The AEX has in the larger scheme of things moved much like other markets around the world. In the larger picture, viewed from the bottom of 2009, it remains in the category of weak indices that is still far from the highs of the last bull market that ended in 2007. In the shorter perspective I personally think it has been quite strong relative to others. Most would probably say that the last peak of this index was set on the 7th of September, but since I think this top is part of the now ongoing correction, according to my standards, the top was actually the one set on the 21st of August at about 336. Being able to perform a new high within a correction is to be considered a positive, and most important a clue of more upside to come once the correction has run its course.
The 200 day MA is turning down and the 50 day MA has turned down, but they haven't crossed yet. The daily RSI is down trending and the last uptrend from the September 2011 low is according to my judgment clearly corrective. Prices are at or just above the 200 MA which often works as support. Important support longer term is found at or close to the 302 level and around the last larger low at about the 280 level.
Trading thoughts: Since last week’s drop - which is probably still ongoing - was quite strong, I think there's a good chance the AEX will reach it 61.8 % retracement of the last uptrend at about the 302 level. The AEX is, at this point in time, in short-term shorting mode until the 302 level is reached, and as long as the 330 level isn't taken out to the upside. I expect the decline to make a 3 wave pattern and the ongoing drop is the first wave of this drop. With this said, there should at some point be a bounce which could be sold into before the last drop towards the target level. The top of that bounce would be a good place for a stop loss, once it is in place. In the larger scheme of things, I am at this point in time expecting the AEX to set new highs in the ongoing up leg from fall 2011, so if one want to take longer term positions it would probably be better to wait for this market to show signs of a bullish reversal from above mentioned support.
AEX 4 hours close up.