Today we will take a look at the AEX index, based on the quarterly chart, with wave structure (1), RSI (2), and Thomas DeMark's counting system (3).
I am actually a quantitative analyst who works with algorithms at various levels. The investment systems I have created are based entirely on this. However, these algorithms and their results are not public and are therefore not discussed publicly.
However, the three chart elements mentioned above can be discussed publicly, and the results are interesting enough for investors.
The composition of the AEX index
The AEX index consists of the 25 largest listed companies in the Netherlands in terms of market capitalization. Its composition has, of course, changed significantly over time, reflecting changes in the economy.
Since the rise of semiconductors, a pillar of the modern economy, the AEX index has become more of a European technology index. ASML has the largest market capitalization, despite the sharp decline this company has experienced on the stock market since its peak in 2024. ASML has its roots in Philips. Philips itself is also still a manufacturing company, but nowadays it focuses entirely on the medical sector and is no longer one of the largest AEX companies in terms of market capitalization.
ASML is followed in market capitalization by Shell PLC and Unilever, both companies that have always been part of the AEX. Prosus follows next, which is a relative newcomer. Through Prosus, investors in the AEX can gain exposure to China, as Tencent is Prosus's most important holding.
Looking at the remaining 25 companies, we can conclude that many sectors of the economy are represented in the AEX index, and that investors therefore achieve reasonable diversification when investing in the index.
OVER TO THE CHART; DEMARK'S SEQUENTIAL COUNTS
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A month ago, I discussed the monthly chart of the S&P 500, which explains DeMark's methodology in detail, so I refer you to that article for further explanation. Suffice it to say that the most important thing when 'counting out' a trend in this way is that a '13' appears in the chart. That '13' can represent a peak level in an ongoing uptrend and a possible bottom level in an ongoing downtrend.
So what do we see in this quarterly chart, which shows the picture from the run-up to the peak in 2000 up to now, February 2025?
For us, the countdown starts from the bottom of 2009, when the market cycle we are still in today began. We find the first '13' in the last quarter of 2017. This is the purple count, the TD Combo count. In a strong trend, this count serves more as a warning, as the most important count, the Sequential count, was still in full development at that time. However, in hindsight, it is interesting to see that anyone who had the count in their chart at the time could have considered not investing in the AEX in 2018. The 2018 investment year was negative for the AEX index, even though the decline only gained momentum in the second half of the year.
We can therefore conclude that the first TD Combo 13 in the quarterly chart of the AEX was reasonably accurate for long-term investors, to say goodbye to the AEX index for a moment.
THE SECOND '13'
In retrospect, the second "13" is nothing short of a miracle of accuracy. How DeMark does it, he does it. At the end of the fourth quarter of 2019, an excellent investment year, the "13" appears. Anyone who had noticed it would have said goodbye to their investments on the AEX at the end of December 2019.
We all know what happened next in 2020. So anyone who had assessed the AEX index based on this methodology and the quarterly chart would not have been affected by the coronavirus crash.
This second "13" was the end point of the Sequential count, which is the most important within DeMark's system.
THE LEGALITY OF THE '13'
But just as important as it may be to have a methodology that attempts to find a possible top or bottom level, it is also important to determine what a '13' in an upward trend means. It means that there is a very good chance that, after a correction, the trend will resume. This is because a '13' often indicates what is considered an 'impulse' in the Elliotwave methodology. An impulse indicates a real trend, and what we observe in practice when counting to '13' is that when upward trends reach '13', this usually only leads to a correction and not to a new trend.
Translating this to the situation in 2020 explains why the RVM Strategy and RVM Retirement systems had an excellent 2020. Firstly, there had been a good warning of a peak, but secondly, and more importantly, it was very likely that the Corona crash would turn out to be a buying opportunity, because the '13' at least pointed to the imminent return of investor appetite, and then it would be possible to calmly assess whether a higher or lower peak would emerge in the underlying value.
HOW ARE THINGS GOING AT THE MOMENT?
Currently, there is no sign of a '13' in the AEX index on the quarterly chart. As far as this methodology is concerned, you have to say that the situation is positive. On a quarterly basis, which is obviously a very large scale, no peak level can be identified, which is positive news for investors.
Always remember: this is a long-term investment. A whole investment year is not that significant on a quarterly basis; it only amounts to four candlesticks. So the '13' is still a long way off; it may take several years before we see it.
THE RSI
For an explanation of RSI, you can consult the internet or refer to the article on the monthly chart of the S&P 500. (View the article here)
When there is an upward trend, I mainly look to see if the RSI is starting to become overbought. This is positive for the long term, but a warning for the shorter term.
At the bottom of the chart, you can see a green circle, which is where the RSI became overbought, at the peak of 2021. This told us two things: on the one hand, that a correction was to be expected in the short term, and on the other hand, that the upward trend would resume afterwards, with the expectation of a new peak in the AEX.
How did that turn out? 2022 was a weak year, due to Russia's invasion of Ukraine, the first major war of conquest since World War II. Recovery began again in 2022, and in 2024, the AEX reached a new high. The warning should be that this happened with a lower RSI. Even with the new high for the AEX now in 2025, there is a lower RSI than at the peak of 2021.
This is not strong, and it is quite possible that the AEX will have to concede more ground in the coming quarters.
That is what the RSI tells us; however, the positive news is that DeMark's Sequential count shows us that declines remain worth buying in the big picture.
THE WAVE COUNT: WE ARE IN PHASE V OF V, THE FINAL PHASE OF THE UPWARD TREND
Here you can see that we have observed a movement III – IV within the objective wave count. This was also visible on the S&P 500 monthly chart. We are therefore in movement V, normally the last cyclical upward movement, and within that we are in movement (iii) of v of V.
So we are well into the trend, but not at the peak, as the wave count tells us. An (iii) of v of V can last many quarters, and even a correction of – 10% could be part of it, in theory.
CONCLUSION OF THE ANALYSIS
The assessment of the AEX quarterly chart based on Thomas DeMark's counts, the RSI, and the wave count is "Buy on dip." The quarterly chart shows a very large picture, so declines of 10% are quite possible, but the expectation is that the AEX has not yet reached its peak. We actually expect that to happen in a few years' time.
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