We forget that companies become party to a contractual obligation that makes them responsible for using the funds raised from the general public in the best possible way and at the same time produce a profit for its shareholders. Over the centuries we've studied many different types of businesses having been injected with ordinary individuals savings that maybe amounted into firms that have since stood the test of time or simply fallen from glory. But if we were to pinpoint a particular time in history where the foundations of such processes were forged it would've started in Amsterdam in 1602.
The Dutch East Indies company became the first company to issue stock on a public platform and ably allow its stockholders to buy and sell stakes in the company to other willing participants, thus creating what we formally believe to be the first stock market in the world, the Amsterdam Stock Exchange, being born into the history of finance.
Although much has changed since then, Amsterdam will always been seen as the starting place of a mechanism that provided a choice to channel savings directly into the hands of companies instead of banks intermediating themselves between the lenders and the borrowers, it thus evolved into a new form of financial freedom for individuals to take an active interest in the return of their wealth. One only appreciates the enormity of the moment in history when they weigh up the economic size and contribution of the financial industry to the world economy.
Much of the attention that was once drawn to the Amsterdam Stock Exchange may have escaped through the years it must be said that it still hosts an array of companies with distinguishable brands that have made a mark. Following its buyout by the the Euronext group it remains a prominent player in the European equity scene with the AEX indexing the 25 biggest companies listed on the exchange.
Companies that feature in the AEX 25
- Phillips
- Royal Dutch Shell
- Unilever
- Heineken
- ING group
- TNT Express
- Air France-KLM
Monthly
Peaking at the height of the I.T bubble of 2000 the index hasn't made much ground in reaching those levels again with the 2008 Financial Crisis producing a lower high that helped enforce the downward bias that's been experienced in this stock market. It must be stressed that the low registered during the beginning months of 2009 was slightly lower than the previous low but it wasn't deep enough to trigger an extended slide to the downside.
The support offered here has allowed the index to slowly creep its way up towards the long term downtrend with the result of having been broken in late 2014 not without its own complicated circumstances. Observations show that a possible uptrend was formed from the 2009 lows till present with no degree of being broken however I use the word possible because I can't be confident in the trend having assessed the interval between the time price retests the trend line.
We see that the latest retest took place a while after the previous and although the retest proved effective it could be fatal because the lack of sturdiness in the trend line.
Another great directional gauge I've posted on the chart is the 8 (Yellow Line) and 21 (Blue Line) SMA which gives us a clue to what to expect with the current indication signalling a drop off in price as the 8 is falling below the 21. The gauge has been accurate over the past 25 years with the only one crossing producing a false signal. This together with what looks like a cup and handle formation that'll need to be closely assessed in a smaller timeframe, it does look as if there is some weakness in the index.
If we were to assume that the bullish trend could persist further we'd need to see a break upwards from the level of 480 from there we could feel hopeful that the price wouldn't have much resistance going higher but the price is somewhat subdued currently and in need of positive sentiment for it to produce the move higher. Right now it feels like a 50/50 situation.
Weekly
Magnifying the cup and handle technical pattern spotted on the monthly into the weekly, we get a clearer picture of how things have gone over the last year or so. Once again we spot the possible uptrend but question the strength of its support by observing the price action during the first 3 months of 2016.
It appears as if the pattern was formed accordingly but has shown a temperament not to compile with what many are expecting to happen. As a result we see untidy price action taking precedent over orderliness in the current year of trade. From a general standpoint, a chartist would prefer to see smooth transitory movements taking place to be confident of the trend.
The large oscillatory moves between the 50 and 200 SMA is indicative of what we've witnessed on most stock markets around the world this year with no clear direction. It can be said that we've become familiar with these patterns developing which does give them correlative feel. Its important to note that the cup and handle pattern is active and will only be nullified if the level of 480 is taken out.
With the RSI drifting below 50 the momentum is clearly to the downside so a degree of caution should be heeded when trading in this market.
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