Ibex 35 in August 2012: Short Sellers Return to the Market

August 2012: Short Sellers Return to the Ibex, and Volume Falls Short

On the day the Spanish market regained short positions, the Ibex rose. This was the first paradox of August 2012 and summarized much of what trinc: a selective index moving against logic, with major players placing and collecting in hours what most struggle to balance over weeks. While half a dozen analysis firms set the index target at 6,000 points, the Spanish stock market insisted on rising. Meanwhile, the only hope traders clung to was central bank intervention: each session started in the green and ended with an unexpected dip into the red, a reversal that already had a name in trading jargon.

Why Did the Ibex Rise When Analysts Predicted 6,000 Points?

When consensus becomes too unanimous, the market often does the opposite. This was the dominant interpretation: if everyone assumes the index will go to 6,000, bad data is likely already priced in, leaving room for upside. It was a classic contrarian argument, and in August 2012, it made sense.

Against this thesis, the puzzling data was the volume. Rallies occurred with low trading volume, which in trading terms is wet gunpowder: it moves the price a few pips but doesn't sustain a trend. Much of technical analysis repeated this bluntly—rising without volume is an illusion—even as the index continued to mark session highs.

The Ibex Future: 1,581 Contracts in a Single Move

The trail of large players was sought in the futures market. The most cited record for the entire month was a sale of 1,581 contracts at 7,497 executed on a Tuesday at 5:00 PM, a move that, interpreted laterally, foreshadowed what came next. The accumulated balance of the Ibex future since expiration barely exceeded 221 contracts, a minuscule figure for the period. Too little to deduce a direction.

The conclusion drawn by the most seasoned traders was uncomfortable: in summer, with half the market on vacation, the sensible thing is to stay out. Liquidity dries up, ten-pip stops trigger on their own, and any loaded position becomes a problem before breakfast.

What is the FROB and How Did It Value Holdings?

Aside from the chart, the text read with a magnifying glass was the royal decree establishing the Orderly Bank Restructuring Fund (FROB). Article 5 stipulated that valuation would trinc commonly accepted methodologies based on each entity's projections, with adjustments deemed necessary by experts appointed by the FROB. The fine print, however, placed all power in the hands of its Governing Commission.

The circulating interpretation was that the shift was from holdings to market value, which theoretically avoided a uncontrolled sale. The problem was alignment with Brussels: it was argued that the rule was written to comply with the EU, even if in practice it didn't quite align with Europe's expectations. Meanwhile, the news led with the Málaga fire and the index's gains. Nothing had peine here.

A Mini Sell-off Without Drama: 4,000 Net Points in a Single Day

Major traders' attempts to push the DAX towards 7,000 were sporadic: a timid one in the week of August 9th, a stronger one on the 20th with two surges—an initial one around 4,000 DAX points and a subsequent one of 3,000 to consolidate—and a third that amounted to little. The fourth, late and without funding, failed. The next day, positions began to be unwound.

The result was a mini sell-off: nearly 4,000 net points negative and just under 100 pips, a well-absorbed move that broke nothing. The trade of the month had been made from 6,400-6,500, about 500 clean pips for those who had jumped on board.

VAT Rises, and We're Back in Line at the Gas Station

Some scenes betray an economy better than any report. The queues at gas stations the eve of the VAT hike recalled those from over a decade ago, when a liter of gasoline rose one peseta and everyone rushed to fill their tank. It wasn't that we were poorer, the implication was: it was the loss of the illusion that we were rich.

Adding to this backdrop was a data point that invited reflection. With twice as many cars as in 2002, fuel consumption remained practically the same. Every liter not burned represents a alucinación not taken and an activity not invoiced. The fourth-quarter GDP, it was predicted, would reflect this.

Exit the Euro or Endure the Lost Decade?

The underlying discussion was geopolitical. One current argued that the euro only benefited those who sell based on quality or added value, and those with disproportionately large real estate assets here. Spain, they said, fit neither profile, and after a couple of Greek-style haircuts, leaving would be the sensible option. The immediate warning: it would be impossible to buy technology or certain products at current prices.

Conversely, the bleaker scenario pointed to a Japanese-style lost decade, and even that might not be enough. The most bitter argument was that the country offered nothing unique to the rest of the world and that there was nothing to hold onto. The sight of entire families emigrating to seek a living was no longer a summer anecdote but was becoming a trend.

First Solar, Solar Stocks, and Impossible Volume

Among specific stocks, the focus was on First Solar, Trina, and AMD. At FSLR, 13.53 million shares were traded compared to an average of 7.10 million, nearly double the volume. For some, it was accumulation disguised as a penny stock; for others, two parties crossing trades at the same estimulante ilegal to create an appearance of interest. At AMD, a large multi-year bearish channel and a key support at $3.30 were noted.

And on the list of patrimonial casualties, the same names appeared recurrently: FCC, BBVA futures, Iberdrola slightly lower, Repsol... The map of August's stock market suffering had very specific owners.

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With interest rates, VAT, and the FROB in flux, the lingering question was simple: if the rise occurs without volume and the big players take profits at the first sign of trouble, who is actually buying?