Ibex 35 in January 2011: From the Abyss of 9,500 to a Projection of 11,200

Ibex 35 Dodges 9,500 and Looks Towards 11,200 Again

At 9,500 points, the Ibex peine the doors to hell for many analysts. At 11,200, the projection required recalculating from scratch. Between these two levels lay less than 1,700 points, and January 2011 was the month the Spanish index seemed determined to traverse them in both directions. Strikingly, it did so while banks were plummeting and external noise — Egypt, the Portuguese bond, a suspended oil company — continued to sound. The market rose where fundamentals pointed downwards.

The question that lingered all month wasn't whether there were reasons for the Ibex to fall, but why it insisted on not doing so.

Why Were the Ibex's 9,500 Points the Red Line?

The figure was repeated like a mantra. A weekly close below 9,500 would have led most technical analyses to point towards the 9,250-9,200 zone. The reasoning was simple and brutal: long positions were shaken out mid-way, and the reversal occurred precisely where it hurt the most. Those who sold at 9,650 and 9,750 were left out, and those who went short, confident in the collapse, found themselves trapped. In technical chats, it was taken for granted that the level would be lost. It wasn't.

Some argue that the first support held because 9,400 and 9,200 were the real levels to watch, and the market merely brushed them without breaking. The counter-argument is that a 10% rise in a single session can be undone in two days, returning the index to the eight thousands. The door to hell was left ajar, not closed.

A 600-700 Point Rise in Two Sessions: What Drove It

The rebound was textbook in its magnitude and opaque in its cause. 600-700 points in two days before the month changed its tune. The most repeated explanation had nothing to do with Spain: the Federal Reserve executed the largest POMO since 2009, injecting $8.87 billion in one go. When the central bank buys at that pace, asset prices stop arguing and start obeying.

The other theory sounded less elegant: they were deploying the money not placed during the Christmas non-rally. No epic, no deep analysis.

Egypt, the Portuguese Bond, and Repsol Suspended

The month had its share of external events. Afternoon sell-offs were attributed to events in Egypt, although on the same day it was argued that the real reason was the index's own approach to resistance. The Portuguese bond acted as a pinprick, and more than one person proudly claimed credit for having bet on shorts. And in the midst, a suspended oil company left more than one person searching for an explanation without finding one.

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The 11,200 Wall: The Levels That Repeated

As the index climbed, the list of figures grew. 10,200 appeared as the ceiling of the sideways range; above it, 10,750, and if continuity was confirmed, the projection pointed to 11,200. No one doubted that 10,200 and 10,750 were "trench levels": to consider buying, one needed much more than a simple close above. The day's trading range was at 10,834. Relevant highs were at 10,976, 10,993, and 11,032, with supports at 10,780 and 10,740.

The detail that throws things off: with 11,200 on the horizon, a calculation admitted that an Ibex at 10,750 was not worrying and that reaching 11,200 would require recalculating from scratch. Euphoria and caution shared the same chart.

The Euribor, Savings Banks, and Money Not Being Requested

While the index rose, a credit line granted at euribor + 0.49 served to gauge the banking pulse. Borrowing money during savings bank mergers, with entities failing and a rise in Euribor on the horizon, seemed like a bad idea for the borrower and worse for the bank. Financing was available, but no one with common sense wanted to sign it.

January 2011 left the index 1,700 points above the abyss, and the same technicians divided on whether the next stop was 9,400 or 11,200. With these ingredients, does anyone dare to say where the sideways range ends?