The current course of the AEX Index
It is Friday, August 30, and the AEX is at 922 in the afternoon session. That is 15 points (1.6%) higher than last week's reading. Above you will find the chart of the AEX since January 1, 2024. You can see the most likely scenario for this year plotted.
The AEX started the week hesitantly with fluctuations between 905 and 910. As in the previous week, the AEX broke out on Thursday and reached the weekly high at 923. The main events were the Nvidia figures on Wednesday night and the core US inflation figures released this afternoon. Nvidia had great numbers but its outlook was still not met with applause by investors. The stock dropped from $125 to $117 (minus 6.5%).
The inflation figures may be more interesting. Annual core U.S. inflation was 2.6% in July, 0.1% lower than expected. Inflation is declining so the Fed may start cutting interest rates. Good for equity markets. However, people also fear a hard landing for the economy. Decreasing inflation rates indicate a gradual slowdown in economic activity. In the current state of the U.S. economy, recession fears still hover over the market and dominate. Lower inflation figures are therefore processed slightly negatively by the markets.
All eyes are on next Friday because that is when the very important monthly labor figures in the U.S. will be released. Last month's figures triggered panic selling and the AEX fell to 840.
What does this mean for sentiment?
Market sentiment in equities has shifted towards a more positive outlook, thanks to the robust recovery that has been observed. A strong rise soon makes one forget the previous decline. The situation at present can be described even more strongly than last week as "make or break."
What is the expectation of the course of the AEX Index?"
The algorithm is completely neutral on the AEX due to high uncertainty. Due to the high volatility at the time of the decline at the beginning of this month, we are also seeing larger-than-expected breakdowns in the recovery. The recovery from the 840 to the 923 is powerful but remains a recovery after a larger decline.
Note that the position is neutral for a reason. As reported, the AEX is moving into the Make or break zone. Specifically, this means that the algorithm is up against a vision change. Namely, if the AEX sets an initial top around 925-930 and then stabilizes and after that closes above this zone, the algorithm will in all likelihood assume that the correction has been completed and that the AEX will start the ride from there to the price target at 1025. It is not that far but we should mention that a change in the preferred scenario may be coming.
The major trend is up and the indicated decline is a healthy correction and offers perfect opportunities to buy shares for the longer term. AEX price target remains 1025 points.
Back view: read our view of the AEX from August 23, 2024, here
Course movement of the Nasdaq
The Nasdaq futures are currently at 19,530 which is 150 points (0.8%) lower than last week's reading.
The Nasdaq futures have recovered very strongly in recent weeks from the big drop earlier this month. Over the past week, the futures are quietly hovering slightly lower between 19,100 and 19,800, following the path indicated by the algorithm earlier.
What is the expectation of the Nasdaq's price movement?
Because of the currently higher-than-average risk, the algorithm is neutral on the Nasdaq. The Nasdaq is also in the make-or-break zone and the direction for the coming weeks will depend on the monthly labor figures from the US on Friday afternoon.
The Nasdaq, in the most likely near-term scenario, has already completed the recovery and can continue the correction from the current level and finish at the 16,500 level.
Importantly, this scenario does not yet have initial confirmation so there is no valid short signal. Especially with the risky Nasdaq, the price must now show a confirmation signal before a position can be taken. Currently, the risk of a fierce continuation of the current rise is still too high.
After the correction, the Nasdaq may resume its strong trend toward the long-term price target of 22,900 points for the future.
Below is the chart of the Nasdaq100 future since January 1, 2024, with the most likely scenario plotted.
Important items on the economic calendar for the week of Sept. 2 through Sept. 6:
As reported, the markets are looking forward to Friday, September 6, 2:30 p.m. when the U.S. releases its monthly labor figures.
Monday the U.S. has Labor Day and the markets are closed.
On Tuesday at 3:45 p.m. the purchasing managers' index in the U.S. manufacturing sector will be released and on Thursday the same index for the service sector. Not the most important figure but it certainly deserves attention as it may trigger additional volatility.
Disclaimer: Investing involves risk. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.
