AIM just broke below its moving averages. Here’s why that matters.

If you invest in AIM stocks, you'll have felt the pain already. UK small caps have been hit by the Iran War, and last Monday, the FTSE Aim All Share dropped below both its 120-day and 200-day moving averages.

If your eyes glaze over with technical analysis, I don't blame you. But there's real power in simple indicators. I've been tracking them for years, as they have a remarkable track record for timing.

In October 2023, we noted that AIM was at its most oversold since the global financial crisis. The index was deep below its 120-day moving average and there were no buyers in sight. The market put in a bottom two weeks later. After another couple of months, AIM broke above its moving average and we called the trend change. AIM rallied strongly from those lows.

Now, the same signal that said be brave is saying be careful. So I’ve gone back through 30 years of data to understand whether to pay attention.

AIM - a game of two halves

Back in 1996, the FTSE AIM All Share Index (FTSE:AXX) was priced at 1,017. Today it’s 774. Yes, a buy-and-hold investor in AIM stocks has lost money over 30 years....