AEX index technical analysis after the Dutch elections: Is it a buy?

The AEX index has joined its global peers like the Dow Jones, S&P 500, and KOSPI in a strong rebound recently. After falling to €712 in October, the blue-chip index has rebounded by over 6.7% to €760, its highest point since August 15th.

The Dutch AEX index will be in the spotlight on Thursday as investors react to this week’s election in the country. Geert Wilders has won the election to become the next prime minister becoming the second right-wing politician to win after Argentina’s Javier Milei.

Wilders is seen as a controversial figure in Dutch politics for his views on islam, immigration, and the European Union. His Freedom Party has vowed to impose strict immigration rules to reduce flows from Africa and Asia.

Most importantly, he plans to hold a referendum on European Union (EU) membership. It is unclear whether the so-called Nexit will succeed. 

Besides, Brexit has not achieved the autonomy that its leaders promoted and the UK’s GDP has not done well since leaving the EU. Many companies, especially smaller ones, have found challenges doing business in the EU.

The AEX index has done well in the past few weeks as investors assess the outlook for central banks like the Federal Reserve and European Central Bank (ECB). The most recent FOMC minutes showed that most officials embraced caution.

In the European Union, the ECB warned that there were early signs of stress in the bloc’s banks as interest rates sits at the highest point in years. As a result, it asked banks to increase provisions to cover bad loans as defaults rise. 

All this means that the ECB and Federal Reserve have likely stopped hiking interest rates, which is a positive thing for the AEX index.

The most active AEX index companies are ASML, Shell, ING, Prosus, Adyen, Heineken, and Randstad. Shell shares have pulled back as crude oil prices have dropped following disagreements among OPEC. 

Adyen share price has jumped to €1,060, the highest point since August 16th. The company has done well after it published encouraging results recently. Heineken, on the other hand, has struggled as its sales have slowed down. Its stock is down by over 20% from the highest point this year. 

AEX banks have also struggled. ABN Amro stock has dropped by 19% from the YTD high. Similarly, ING Group and Rabobank have also slipped.

AEX chart by TradingView

The daily chart shows that the AEX index has staged a strong recovery in the past few weeks. It has jumped to €760, higher than November’s low of €712. It has also moved above the 50-day and 100-day moving averages. The two averages are about to have a bullish crossover.

Further, the Relative Strength Index (RSI) has moved close to the overbought level. Therefore, the outlook for the index is bullish, with the next reference level to watch being at €794, the highest point in 2023. This price is about 4.65% above the current level.

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