Ibex 35: Market braces for a fall to 4,500 points

Ibex 35: Savers brace for a crash to 4,500 points

March 2012. The Ibex 35 is trading sideways in a fragile range between 8,100 and 8,400 points, and no one believes the rebound. In the jargon of the Spanish stock market, the word repeated is not "recovery", but guano. A homegrown euphemism for the crash that, according to the levels investors are watching, is imminent. This isn't bar-stool pessimism: it's a level calculation.

The most common scenario isn't a gentle pullback. It's a devastating fifth wave down that would drag the index down to the 4,500-5,500 point range. And those saying it aren't speaking from panic, but from the charts.

Why was the Ibex falling in March 2012?

The short answer: debt. The maturity calendar is concentrated in July, and the market is pricing in the need for a bailout. A widely cited analysis from that period recalls that July 2010 wasn't a coincidence and warns that things will be worse this year.

Add to that the risk premium. Spain's spread isn't easing in the first quarter, theoretically a quiet period for maturities. And the 12-6 month Euribor, at lows and falling, anticipates a contraction in eurozone consumption. Everything points in the same direction: less credit, less spending, less stock market value.

The 7,500 level, the border between rebound and collapse

The Ibex is approaching the long-term upward trendline, the one that has stopped all declines for years. The key zone is between 7,500 and 7,730 points. If it holds, there's a rebound. If it breaks, and the MACD looks horrendous, the floor recedes towards 5,700. A scenario as low as 2,700 is even drawn, though analysts themselves consider it science fiction.

Every time the index touches this trendline, it bounces, but with less force and reaching less far. The upward structure is exhausting itself through wear.

Big money isn't trading, it's selling

The intraday detail dismantles any narrative of an orderly market. A typical session for the Ibex futures opens with sell orders of 197 contracts at 8,090, 149 contracts between 8,165 and 8,160, and ends with 164 buy contracts between 8,160 and 8,165. The final balance: 68 positive contracts. This is either textbook manipulation or risk management, depending on how you look at it.

The pattern repeats. First, they place huge amounts of stock, and then they turn the market around. The day's low is hit at 9:40 AM and the high at 4:15 PM. Those who look at the daily candle see nothing; those who look at the contracts see the mechanics.

BBVA at €5.99, Iberdrola at €4.25, and Sacyr at €2.26

Individual stocks tell the same story. BBVA triggers the stop at €5.99, and the buy target moves to 5.5. Iberdrola is trading at €4.25 and threatens to break below 4. Sacyr, at €2.26, causes almost philosophical bewilderment: does nobody want it? Banco Popular has a bearish technical target at €2.3.

The gloomiest scenarios for two to three years: Telefónica at 8, Santander at 3, BBVA at 3, Iberdrola at 2. Cycles, they argue, have always worked this way. And big money cares very little about the savings of families.

Buy when everything looks bleak

Here the debate splits. For some, an Ibex at 6,000 offers very high probabilities of making a lot of money in the next upward cycle, and the bottom will be "the best investment opportunity in decades." Long-term recommendations focus on Gas Natural, BBVA, Iberdrola, and Acerinox, with Gas Natural's cash as the main backing. For others, the stock market is only good for scalping or short positions, and spare money should sit in IPF (Spanish Treasury Bills) at 4%.

The most useful warning isn't about prices: it's about ego. Insisting on not admitting a mistake is the most ruinous thing in this business, because you almost never make just one mistake. And the most important thing isn't the how much, it's the when.

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To top it off, a scene that makes skepticism understandable: on an Intereconomía program dedicated to debt, a pundit calls the real estate bubble an "urban legend." In March 2012. With the property market bleeding. No further analysis is needed.

The problem, and where everything gets stuck, is the opportunity cost. The fact that the stock market is at half its historical maximum says nothing about when to enter. That stocks are cheap, neither. No one untangles that knot.