AEX Long Term Thoughts & Scribbles

The AEX made a recovery high on Jan 15th, while the DOW made an ATH on Dec 31st. This is (so far) still consistent with a predicted high in 2013. See DOW chart at the bottom. It’s interesting that the DOW pushed this prediction to its limit! So far so good. Based on the Fibonacci sequence we now ‘know’ that the DOW needs to make highs in 2016, 2018, 2019 and possibly 2020 before bottoming in 2021. Again see bottom chart of DOW. Since the AEX is highly correlated to other indices, including the DOW, a similar pattern can be expected. Let’s look at a couple of scenarios:



The chart above is the most bullish (except for 2021, there is no escape in any way). The AEX is making a large corrective pattern (yellow) A-B-C that is a zig-zag. Since wave (yellow) A counts best as a 5-wave, the same is expected for wave (yellow) C. Wave B is subdivided in a corrective W-X-Y. Note that wave X looks impulsive but counts best as a 3. This is consistent with X or B waves. Wave Y further sub divides in an a-b-c which appears to develop as a 3-3-5 flat. The problem with this flat is that it is not really flat.

Shorter term in this projection, the AEX should retrace the move from the 2008 low to the 2014 high by (about) Fibonacci ratio 38%. More decline (blue line) by 50% or 61.8% is possible but then the pattern becomes less viable. The chart below ‘solves’ this problem. So for now, I consider this chart less probable.



In the chart above the AEX makes a similar A-B-C correction, but wave B develops as a (red A-B-C-D-E) contracting triangle. This solves a number of problem with the first chart, while still maintaining options for new highs in 2016 and 2018. This scenario becomes more likely when the AEX declines to 250-300 this year, in which case wave (red) C is retraced 61.8%. This is certainly possible and will conclude a Kitchin cycle that started at the low in 2008.




The chart above becomes viable if the AEX decides to crash in 2014. This is certainly possible at the end of the current Kitchin cycle. The same happened in wave (red)B in 2007-2008, which ended that Kitchin cycle. Also note that the AEX is still developing a large (yellow) A-B-C but again wave B is different, this time a triangle with a flat bottom. This bottom will be tested 3 times (Yellow) A, (red) B and (red) D and will then crash into wave (yellow) C. Trendlines like that will seldomly be tested more than 3 times, which makes this option more viable. Also, wave (red) E itself subdivides as a 3 ,where wave B or X itself is a smaller triangle. What’s nice about this pattern is that it fulfills all the projected Fibonacci highs: 2016, 2018, 2019, 2020.

Short(er) term we need to see how far the AEX declines. All 3 examples (there are a lot more) call for a 3 wave decline this year. Since 3 waves come in many forms and the decline only just has started ┬áit is difficult to project how it will unfold. Each new trading day will add more information, allowing us to fine tune any of the ‘predictions’.

The chart below is shown for reference and discussed extensively in past articles.