Ibex 35: Battle between 10,000 and 11,000 points

Ibex 35: From the 11,000-point rally to digesting a flat year

December 2014. The Ibex 35 faced the end of the fiscal year with the same question that had lingered for months: 11,000 or 10,000 points? The bullish thesis was not improvised. It argued that the primary trend remained intact unless the wedge drawn on charts broke, and that long positions should not be under pressure, with a caveat dangerous for leveraged traders without a buffer. The next stop, it was said, was 11,000.

On the other side, the bearish counter-offer was more modest: 10,000 points and no more. Two figures separated by a thousand points summarize the pulse of a year where forecasts ranged from the 12,000 many considered certain to the 8,000 others defended with equal conviction, according to a forum user's review.

The double top that cooled Ibex sentiment

The correction quickly appeared on the charts. Analysis circulating in the thread pointed to a double top and a clear break below 10,500 points, shifting the bearish target to 10,250. The reading was not one of panic: there, precisely there, was the point to buy cheaply if anyone had liquidity and nerve.

The underlying problem was different. Targets, whatever they were, would not be reached because those responsible for moving the market are, according to the recurring joke in the thread, very foolish. Better to talk about stocks and stop arguing with ghosts. The mocking tone did not hide an uncomfortable reality: the last two sessions had been bad, and the annual balance, according to a forum user, was poor though not disastrous.

Which stocks hold up over ten years in a portfolio?

The question came straight out, and the answer arrived in the form of five names from the trading floor: BME, ENG, IBE, REP, and SAN. Case-by-case development was missing: there was no company-specific thesis, just the list.

The tactical move was documented. ENCE shares were sold, according to the forum user's message, with gains described as juicy. In a year that this same user described as bad for the index, closing a position in the positive is no small detail.

Then there were the accounts of someone who had proposed a long-term strategy at the beginning of the year and later published their own track record, with the warning that these were personal operations and advice they would never dare to give. The tally included successes in bold and, according to the most repeated reply, left out what did not look good: the losses. Nobody sells in the red when they can avoid it.

Greece, German Bunds, and noise from abroad

While the Ibex remained strangely quiet, the outside world was creaking. The Athens stock exchange dropped 7.2% and continued falling, in a scenario a forum user described as default and punitive lesson. In Brazil, the Petrobras mess added another layer of uncertainty. And in the debt market, the five-year German Bund approached negative territory: annual yield of 0.012% and falling.

That the Spanish selective index withstood that downpour was striking: a forum user described it as an "immutable" index and questioned the reliability of its behavior. With Greece and Brazil in the same news broadcast, the Ibex's calm was read more as an anomaly than a sign of strength.

The CAPE warning: cheap does not always miccionan profitable

A summary of an article on country-specific CAPE ratios shared in the thread left an uncomfortable conclusion. In 2013, investing in markets whose CAPE was lowest at the end of 2012 —the cheapest by that criterion— would have yielded excellent returns. In 2014, the same methodology would have caused substantial losses. Buying cheap indices simply because they are cheap guarantees nothing.

For the forum user bringing this up, the data served to dismantle blind faith in valuations as a compass. And incidentally, to leave as the big win of the course whoever anticipated a flat year, versus those promising 12,000 or 8,000.

2015: Between the hammer blow and the year-end rally

One forum user's bet for the trinc year was twofold. First, a year-end rally to catch a couple of bullish weeks and exit in time. Then, their scenario of a 2015 with a hammer blow of 2,000 to 3,000 points down when it came time to refinance the debt of weak eurozone countries, including Spain. Enter, rise, exit, and watch the bullfight from the safety of the barrier for a few months: that was their roadmap.

For January and February, another forum user expected attractive prices, with the idea, according to their phrase, that the four lions running the market would leave some decent company at a bargain price. There was also someone who announced they were going on sale, and someone who admitted having returned the boat they had ordered waiting for the Christmas rally.

The year closed without anyone fully balancing the books. The forecast of 11,000 remained pending confirmation, and the Ibex reached the end of the fiscal year with the same fruta as an awkward index, with a thousand points separating the most optimistic expectation from the counter-offer.