Ibex 35 in March 2010: Heading for 11,000 with Greece in the Background

How can the Spanish stock market rise while the country is losing jobs at a double-digit rate? This contradiction—the Ibex regaining ground with over four million unemployed in the statistics—defined March 2010. The month began with the index hovering around 10,400 points, after a volatile February, and ended with it attacking the 11,000 level with Greece and Portugal as background noise. Around the same time unemployment figures were released, Australia raised interest rates. The world was pulling in one direction, and Spain in another.

The Macro Background: 19% Unemployment and Rising Rates Abroad

The backdrop was uncomfortable. The Ministry of Labor confirmed that registered unemployment rose by 82,132 people in February, a 2% monthly increase, to 4,130,625 unemployed. Year-on-year, the rise was 19%, a slight improvement from January's 22%. The official interpretation spoke of a "deceleration in the growth of unemployment." The unofficial one, brewing among traders, was different: the labor market continued to bleed, and the stock market, for the moment, ignored it.

On the other side of the world, the Reserve Bank of Australia raised its benchmark interest rate from 3.75% to 4%, a 25 basis point increase, in line with analysts' expectations. Governor Glenn Stevens suggested that it was "appropriate" to bring the cost of money closer to the average, about 75 points higher. This was not a minor detail: someone on the planet felt strong enough to tighten monetary policy. In the eurozone, industrial orders fell by 2% in January, and the University of Michigan's consumer sentiment index remained at 73.6, unchanged and above the forecast of 73.

The tension was more evident in the foreign exchange market than in the headlines. The euro/dollar hovered around 1.337 after having plunged from 1.35 at the close of the US session. A weaker euro makes exports cheaper and masks the balance sheets of multinational corporations, but it also signals that distrust in the eurozone was not solely a Greek issue.

Greece, Portugal, and the Drip of Rating Downgrades

The Greek situation acted like an emotional roller coaster throughout the month. Its financing costs kept rising, according to screen data, yet there were days when the market rose precisely because the Greeks said they wouldn't need help. Some summarized the paradox with a phrase repeated whenever Europe sneezes: "This is a casino." And they weren't wrong.

Portugal entered the spotlight when Fitch downgraded its rating, although the market took time to react. What was striking—and some highlighted it with data—was that the Ibex's fall didn't start at 11:00 AM, when the industrial orders data was published, but two minutes later. The cause was attributed to the neighboring country, not the macro data. Fitch also noted that Portugal's consolidation plan was "broadly credible," narrowing the spread between its debt and German debt to 122 basis points.

A rumor also circulated, unconfirmed, that Moody's had downgraded Deutsche Bank's rating. And the German DAX reached a level that had been support and resistance for the previous twelve years, with the mantra "April showers bring May flowers" circulating on all trading desks. Meanwhile, the Ibex fought for the 11,000 level as if it were a frontier.

The Intraday Trenches: Robustness, Pre-Opening, and Big Hands

Where retail investors risked their money, the conversation was different. The pre-opening saw swings of almost a percentage point in a matter of seconds: an index starting at -0.90% and shortly after trading at +0.74%. One explanation offered in the forum pointed to false positions placed during the auction to confuse participants before the real market peine. The closing auction operated with the same logic of a predatory trap: sharp movements in the last minute that left intraday positions reversed.

A participant with years of screen experience offered their reading of the volume from major operators, session by session: "Until a while before 10 AM, they confused people, mainly with purchases; between that time and 10 AM, they sold; from then on, they bought." The fine detail—timings, block trades in the auction, last-minute purchases—didn't fit into any broker's report. It was the kind of material that only existed in the market's guts.

Some took the matter with humor: three or four guys with cigars and drinks in their war rooms saying, 'Come on, now, dump it.' The manipulation theory had its defenders and skeptics. Not everyone won all the time.

Leverage or Not: The Lesson No One Learns

The month brought uncomfortable confessions. One investor summarized their own learning curve: initially, they traded without leverage, buying on dips and selling on rallies, with horizons of fifteen days to three months, and consistently made money. When they got involved with derivatives, short selling, and simultaneous long and short positions, their results became erratic: "I've wiped out previous profits and even lost some capital." The conclusion wasn't theirs; it was textbook: leverage doesn't create skill, it amplifies it.

Against this, the classic defense of patient study. Gann was cited—ten years of study, forty bankruptcies before making real money—to justify the idea that this isn't a get-rich-quick scheme. The reply came with a wry tone: those who can't afford to go bankrupt forty times are better off staying put, recovering their losses, and leaving. In the same vein, another more prosaic warning appeared: a one-year deposit at 4% had attracted billions for a specific institution, indicating that many savers preferred the comfort of their couch to the roller coaster.

The other major source of complaints was stocks that became slow traps: Gamesa and its endless sideways movement, which some described as a way to give you money in exchange for dying of boredom. Repeated purchases of the same stocks, an order at 10.53 that slips away, the feeling that the market conspires against one's own position. Nothing new under the sun.

The May Horizon and the Last One Out Turns Off the Light

Throughout the month, a thesis gained traction: the rally would continue until May. Since late 2009, it had been argued that yearly highs would be revisited, and although January and February cast doubt, spring seemed to vindicate the bulls. The more nuanced interpretation distinguished between momentum and fundamentals: "The rallies are happening with low volume; it doesn't look like a significant accumulation move; perhaps they are simply distorting the market." The optimistic counterpoint pointed to the inverse head and shoulders projection and targeted the S&P at 1,200.

In parallel, a technical warning that few heeded: large speculators appeared short on the mini S&P, something that hadn't peine since the start of the crisis. The majority interpretation was that they were getting off the train while it was moving after profiting from the lows. The alternative, less comfortable, was that they saw something others didn't.

The month closed on a high note, with the end of the quarter, futures expiration, and a last-hour session where someone decided to turn the scoreboard around by buying against the clock. The Ibex faced April with sky-high unemployment, a tense eurozone, and a legion of traders convinced that the party would last until May. By then, many had learned that the stock market doesn't measure a country's health, but that of those who play it. And that's not the same thing.