IBEX 8,000 in February 2013: The Rebound Nobody Believed In

IBEX 35 in February 2013: 8,000 points and the bet on a crash

The IBEX 35 held above 8,000 points in February 2013, and a large part of the market considered it a trap. The index had seen a notable rebound from the summer 2012 lows, when it hovered around 6,000, and that recovery phase had everyone looking at the ceiling. The dominant conviction was not that the market would rise, but that it would fall, and fall sharply. The only question was when. The technical consensus pointed to a floor near 7,000, with a range of downside targets from 7,600 to 5,000, depending on each analyst's optimism or pessimism.

The 8,050 mark as a lifeline

The level that drew all eyes was 8,050 points. Below this reference, the short-term bullish structure was in doubt, and the probability of a serious decline, targeting 7,600, was activated. Above, 8,180 acted as a wall: as long as the price did not surpass this threshold, the danger of a fall remained present session after session. Some placed the next bullish step at 8,276, while others warned that a failure in the channel projection would trigger a "very violent" counter-reaction.

What was striking was the lack of an evident cause for the declines. The index dropped 700 points as if it were nothing and with hardly any media noise. And that, technical analysts warned, is the worst sign: turns often start like this, without apparent reason, and only when the downward trend is already underway does antiestéticar appear.

The VIX soared without the market crashing

In one of the key sessions, the VIX—the Wall Street antiestéticar gauge—rose 23%, and at times even 28%. The puzzling aspect was that the S&P 500 barely fell 1%. This discrepancy made no sense when compared to the indicator's historical behavior. The most plausible explanation: the VIX had been trading unusually low and had room to rise towards the 20 area. The optimistic reading saw this as a simple technical correction; the pessimistic one, as the first serious warning that a market top was approaching.

The movement in the EUR/JPY—with a differential exceeding 600 points between intraday highs and lows—added more noise to a session that several traders described as manipulated, including renewed short positions in Spain.

Bankia and its 1.5 billion share increase

The issue that came to the fore was Bankia's capital increase plan, which contemplated the issuance of 1.5 billion shares. The figure was interpreted in Guinness World Record terms, and some even asked where to buy the book to certify such a record. Behind the joke was a much more bitter reading about the entity's restructuring project and the public money supporting it. A bailed-out bank increasing capital on that scale was, at the very least, a sign that the hole had not been closed.

Inditex, the pillar supporting the index

With banks and the textile company leading the way, Inditex had become the index's support. At that time, it looked very weak: as long as it didn't recover 107 euros, the strategy was to look for short opportunities down to 95, with 104 as the zone to exit positions. And a curious detail that didn't go unnoticed: on a day when the index fell sharply, Inditex only dropped 0.35%. If it had fallen 2% or 3%, the IBEX would have collapsed without remedy.

P/E by country: Spain at 8.6 versus Switzerland's 19

One of the figures circulated to justify the bullish narrative was the international P/E comparison. Switzerland 19 times, USA 16, France 13, Brazil 13, Germany 12, and Spain 8.6. The Spanish stock market was, by far, among the cheapest in its region. The problem was the usual one: a low P/E can be an opportunity or a trap, depending on what the market is discounting. And with the banking sector undergoing restructuring, the discount had a strong element of warning.

Pescanova, Gamesa, and the decoupling of small caps

Pescanova, with its stock at 17.78 euros, was a moving corpse, leaving many wondering who was still invested. Gamesa, which had published presentable results in a PowerPoint, had been bought on Tuesday and was now burning its holders. The television sector was preparing for a reorganization of channels and mergers, from which trouble was expected. And the German DAX, in contrast, was attacking multi-year highs.

Also noteworthy was the decoupling between the IBEX and its peers: the small and medium-cap indices did not trinc the selective's strong rally and remained much closer to their support zones. The euro fell, the BUND rose, and the optimism among investors—described as hysterical—did not align with the health of most stocks.

The rumor of bank provisioning reversal

The topic circulating by word of mouth—and alerting the most seasoned investors—was a message from the management of one of Spain's two major banks. The idea: the previous year had seen excessive provisioning, and in 2013, there was room to reverse provisions and boost results upwards. It wasn't a message to investors but an internal, confidential one. The implication was clear: the famous 3 euros per share from provisions could be forgotten. Beware of endless shorts, warned those in the know.

Argentina, Bernanke, and gasoline as a reminder

On the other side of the Atlantic, another disaster was anticipated. The judge overseeing the 1.4 billion Elliott Associates case against Argentina could declare the country in default that same year, due to the stubbornness of all parties. In the scenario unfolding, everyone would lose.

Bernanke, meanwhile, had hinted that there was no exit strategy for the expansionary monetary policy, or that it would have to be implemented soon, and that a lot of information would be sent to the market to allow anticipation. The statement, read calmly, was quite frightening: the central bank didn't know how to exit the injected liquidity and, meanwhile, continued to fuel the pump. Gasoline prices in dollars per gallon—Spain at 7.06, ranking 22nd globally, between Turkey and Norway—served as a reminder that international price comparisons never worked out favorably.

The closing: prediction with asterisks

The most common bets pointed to a pullback to 7,500-7,700 before the end of March, and a possible market top around spring. None of this was guaranteed: the indices had been indecisive for weeks, proving some right and others wrong in turns. With the IBEX stuck around 8,000, the only certainty was that no one had the final say.

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Disclaimer: this article describes a debate from February 2013 on technical analysis and macroeconomics. It is not an investment recommendation.