April 2014's Ibex: The Wedge Pointing Towards 8,650

April 2014: The Ibex Gambled on Draghi Speaking

April 2014 was not a month for the brave; it was a month for accountants. The Ibex 35 spent four weeks bouncing between a floor closely watched around the 10,100 point mark and a longed-for ceiling at 11,200. The anticipated catalyst – the European Central Bank meeting chaired by Mario Draghi – passed without major surprises. The bet wasn't about investment; it was about the casino. And that month, the casino was moved by American news, not Frankfurt.

This was because the market had decided, with suspicious certainty, that Draghi would not deploy his heavy artillery. The press conference was expected to bring no immediate or drastic measures, and the forex market remained calm after an initial flurry. This consensus of calm – when everyone agrees, there's usually a dead body under the table – set the tone for the month.

Why the Market Waited for Draghi Without Losing Its Nerve

Because no one assumed drastic measures would be taken in the short term. Underlying this was an uncomfortable idea: central banks act not for the economy, but for the markets. This suspicion, often repeated with a cynical undertone, explained why the index withstood every blow without collapsing. The market was probing, keeping everything in stand-by, and waiting to see who would move first.

What was striking was that Spain was performing better than economies with much greater industrial muscle. One participant summarized it skeptically: it's hard to accept that a country like Spain is considered safer than the United States. The implicit answer lay with the ECB, the support of the entire structure. Without that umbrella, price logic wouldn't withstand serious scrutiny.

10,100 as the Floor and 11,200 as the Ceiling: How the Range Was Traded

The range was so narrow it became a trap for both shorts and longs. A significant portion of the month's trades occurred within bands of 60 to 100 points, with quick closes and very tight stops. Those who held on too long ended up looking foolish.

Some declared themselves short with everything from the 10,495 area, convinced the rebound would come sooner, and ended up pyramiding positions from above, leaving an average around 10,550. Others closed long positions at 10,255 after entering at 10,195 and reloaded shorts twenty minutes later. In this choreography of short-term pulses, the difference between winning and losing was reaction estimulante ilegal, not the underlying thesis.

The problem with trading like this is that the market punishes conviction. Admitting it out loud came at a high price: anyone announcing short positions saw the index break above 10,300 the next day.

The 9,450 Gap and the Wedge Pointing to 8,650

The bearish thesis had a name and a number. It was argued that the Ibex was forming a wedge – in all its glory – that would first touch the upper band, then the lower band after a sideways move described as amyotrophic, and that from the gap at 9,450, a pullback would occur. From there, the stated target was 8,650, and the scenario was described as an annihilating fury upon any confident position.

There were nuances: the 9,450 gap was sometimes cited as if it were a thousand points higher, with the subsequent correction that implies. Bar-room technical analysis has its quirks. The important thing is that the pattern was announced as something that would eventually be published in all the media, coincidentally when the downward trend was already complete.

The other leg of the argument was the DAX. The breakdown of support levels in the German index was read as confirmation, not noise. When the German market coughs, Spain catches a cold, and that month the Teutons moved with a volatility that caught more than one person off guard.

Volume Fell as the Index Rose: The Ignored Divergence

The most uncomfortable signal of the month wasn't a pattern; it was a subtraction. In the final stages of the rally, volume clearly decreased. A rise without volume is a rise without conviction: the price advances because it finds no paper to absorb it, not because strong hands are pushing it. The bearish divergence – rising price highs, falling RSI indicator highs, with three peaks – was on the table and repeated several times.

The counter-argument was mechanical: as long as the big funds don't unwind positions to rotate to other markets, there won't be a strong fall. Daily movements are shakeouts to generate liquidity, drops in a sea of latent profits for big money, ruin for retail investors. Turning points were set at very specific levels, with sell signals around 1.898 on the US futures, and everyone watched that figure as one watches a storm at the bottom of the valley.

The Data That Broke the Narrative: US GDP Grew 0.1%

On April 30th, the statistical blow arrived. The American economy had grown at an annualized rate of 0.1% in the first quarter of 2014, compared to 2.6% in the fourth quarter of 2013, according to the advance estimate from the Bureau of Economic Analysis. One-tenth of a percent. With revisions still pending.

And yet, with dismal GDP figures and a reduction in the Federal Reserve's purchase program underway, the indices rose. The reaction was one of disbelief: stimulus cuts and bad economic data, and the market had the audacity to go up. The disconnect between the real economy and prices ceased to be a hypothesis and became an uncomfortable fact that no one could fully explain.

Small Caps Held at €0.80 While Negotiating Their Rights Issue

While the main index was bored within its range, the small-cap market provided drama. One of the most closely watched names held firm around €0.80 with inexplicable volume: it seemed someone was defending the price. The circulating explanation was that new investors had participated in a rights issue at that level, with the specter of a reverse split and bankruptcy as alternatives if the operation failed.

The market's interpretation was different: the company had almost no debt, so letting it fail seemed the least likely scenario. With the price of €0.70 acting as a buying trigger, some were clear about their plan with a thousand euros in hand, waiting it out. The rest, Santander dividends and new rights in hand, were viewed with the patience of someone who has seen too many capital increases during an improvised restructuring described by one participant as traveling with a manic-depressive driver.

From German Coal to the Lisbon Final: What Slipped Between the Charts

The month ended with an energy statistic that was shared and translated almost as a public service: German coal imports grew by 9.3% in 2013, with those from Russia increasing by 18%. Japan and Germany reviving coal-fired power plants to supplement nuclear. Oil, gas, coal: whoever controls energy controls the world. Gas prices became a recurring bet.

And between charts and graphs, life. Barcelona and its parade, the Champions League final that would pit two teams from the same city against each other for the first time in history – Atlético and Real Madrid – and Easyjet tickets to Lisbon at peak season prices. Santander placing rights in hand before the opening, Grifols struggling with 38.50 (50% Fibonacci), the next step at 39.10 (61.8%), and the strong resistance at 41.15. Ferrovial at €18 to sell by Christmas, and the Ibex, meanwhile, remained rather dull.

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The month closes on April 30th without the wedge resolving: the Ibex remains within the range, volume is lacking, and the 9,450 gap is still there, as threatening as it is intact. With these ingredients, the downward break that almost everyone expected should have already peine. It didn't.