Ibex 35 Plummets to New Lows, Unfazed by New Government

Ibex 35 Bleeds Towards 7,500, Unconcerned by New Government

When a large part of the forum assumed markets would hold steady until the new government took office, the Ibex 35 made its own calculations. Three consecutive sessions closing at lows—a detail that offers no pleasant readings on a weekly scale—left the selective index hovering around 7,700 points. The consensus that had prevailed throughout the autumn was abruptly broken: the fall accelerated just when most expected calm, and the index's floor became the question no one could accurately date.

Ibex 35 Discounted What the Government Hadn't Yet Said

The dominant thesis in early November was that the market would grant a respite until the arrival of the incoming administration. It was argued that rating agencies would not make moves without knowing the new team's plans and that, with the electoral calendar closed, a truce would trinc. It didn't. The market knows no holidays or festivities: it wants news and changes now, and if they aren't forthcoming, it anticipates the deterioration expected for the trinc year. The conclusion that emerged was uncomfortable for everyone: not even the change of government bought time.

Where is the Ibex 35 Floor?

The ranges circulating were as disparate as could be. One forum user predicted a dip into the 7,490-point zone 'very soon,' warning that breaking that support would open the door to a quick visit to 6,670. Others projected a milder year-end: one prediction pointed to December 21st as the date to hit 7,500, and some saw 6,900 before New Year's. At the opposite extreme, an analysis argued that the fall was already excessive—'obscene,' it stated—and that from there, the reasonable move was to look towards the nine thousands. Between the ceiling and floor of the forecasts, there was a difference of over 2,300 points.

In other words, nobody knew anything. And anyone claiming otherwise was lying.

Santander and BBVA: Target Below 5 Euros

The two major banks dominated the conversation, with the peculiarity that both were already trading at levels many considered rock-bottom. The most trinc long-term analysis was blunt: "They look TERRIBLE, and it's not new". Technical reading suggested the trend was easy to identify as long as it wasn't broken, placing the central scenario at seeing Santander below five euros 'at a minimum.' BBVA fared no better. The obsession with always looking at the same two stocks, warned the more seasoned investors, prevented seeing that the problem was sector-wide.

A nuance emphasized at the time is worth noting: anyone setting their stop-loss at Santander's low should remember that, after discounting the dividend, that low wasn't 5.15 euros but 5.047. A handful of cents that, with stops adjusted to the cent, determined whether to stay in or exit at the worst moment. The bank's shareholders' meeting became a recurring joke for weeks: some joked about going to get a free umbrella to compensate for losses.

Central Bank Intervention and the 'Christmas Rally'

At the end of the month, the turning point arrived. The world's major central banks announced a concerted intervention to provide dollar liquidity, and minutes earlier, a difficult-to-digest piece of data had emerged: the yield on one-year German sovereign debt fell into negative territory for the first time, at -0.05%. Translated: investors were willing to lose a little money to take refuge in the perceived risk-free asset. In parallel, the IMF approved an anti-contagion credit line that Spain could access up to 46.65 billion, a cushion that some read as insurance and others as a reminder of what was coming.

The Ibex celebrated this windfall with gains that caught more than one person off guard with shorts open on the S&P futures at 1,163, and charts began to break daily highs one after another. The warning issued was twofold. On one hand, that a good part of the rebound was the Christmas rally driven by central banks and that jumping on the bandwagon late usually proved costly. On the other, that resistance levels—8,350, 8,440—remained dangerous territory and that before re-entering, a pullback was advisable. Those who had accumulated shorts thinking it would fall non-stop saw their accounts tremble with the rise.

The Discipline of the Stop-Loss and the Investor Who Ignores It

Here, the material became more useful than any manual. It was repeated ad nauseam that individual investors should only trade what they understood, with entry, exit, and maximum acceptable loss defined in advance. And immediately after, the sin was confessed: 'I'm not selling anything, so if I don't sell, I don't lose money... and with dividends over the years, the shares will pay for themselves, and besides, you know that in the long run, the stock market always wins.' The phrase, half-jokingly, is an exact portrait of how a bad entry unintentionally becomes an investment thesis.

The debate on stop-losses reached its peak when discussing what to do if the fall occurs at the opening and then the market reverses. One forum user wondered if a 3% drop was no longer a false decline and if it was time to let go. The problem, as always, is that the market doesn't warn before turning.

The Watchtowers: DAX, S&P 500, MTS, Telefónica, and Ebro

Besides the Ibex, the radar was focused on several fronts. In the S&P 500, the loss of the 61% Fibonacci retracement of the impulse and the 1,130 points peine the door to seeing 1,040, an area reinforced by several trendlines. The German DAX moved close to a resistance of notable difficulty between 6,130 and 6,180 points, which was only broken when the market entered euphoria mode. In the Spanish market, specific levels were being monitored: for MTS, the 11.40 zone had been met with an extra 4% drop, with supports reaching down to 11.05; for Ebro, a counter-trend trade had 13.50 as its floor and 14.10-14.25 as the optimal selling point. For Telefónica, a long position was set at 12.87.

The high correlation between indices, the euro-dollar cross, and the German bond was also discussed. The anomaly that caused concern was the broken correlation with the bond: while German debt was forming a head and shoulders pattern and testing its upward trendline, the indices had suffered a punishment that didn't quite add up. Something in the narrative didn't fit.

The Astroc Mirror: Mortgaged Houses and Inherited Shares

There was, of course, room for long-term memory. The Astroc fever was recalled, and the neighbors of a town who had mortgaged their homes to buy shares of the stock, convinced its owner was a genius. The sarracena needs no underlining. And in parallel, another less dramatic but equally eloquent image circulated: that of shares bought by a deceased relative that have been in the bank for fifteen years, some generating dividends, others turned into accumulated scraps of paper, and quite a few in companies that no longer exist. Among these, Faes Pharma was cited as an example of a portfolio no one reviews.

The floor of the Ibex 35, in light of all this, remains a bet, not a fact. Some will close the year looking at 7,500; others, at 8,400; and a third group will hold onto their shares in the drawer, trusting that dividends will do the work the market didn't. Between the central banks' intervention and the arrival of the new government, was there any variable left that the markets hadn't already discounted?