IBEX closes October 2014 above 10,480 points

October 2014: From Bearish Panic to Assaulting 10,500 Points

On October 1, 2014, the IBEX began the month reeling from a bloody September, with half a dozen doomsayers sharpening their knives. Bearish targets pointed to 9,370 points for the Spanish selective index, the Eurostoxx lost 3,130, and Mapfre traded below 2.7 euros with a P/E of 9. Thirty days later, the index was attacking 10,480 points, and the S&P 500 hit historic highs. Laughter was promised.

September Left Blood, October Started Defensively

The first fortnight maintained a cautious tone. The advice was to stay out of the market, hold liquidity without rushing, and set the IBEX floor at 9,370 points. Technical references were discussed with watchmaker precision: Eurostoxx resistance at 3,130, medium-term European target at 2,750, rebounds that shouldn't break certain levels. The same figure that marked the start of the apocalypse on the 13th served two weeks later as a ramp to 12,000. What changed wasn't the chart, but the mood.

Mapfre at 2.7 Euros: The IBEX's Value Trap

With the selective index in decline, attention turned to beaten-down stocks. Mapfre below 2.7 euros with a P/E of 9 sparked both interest and distrust. The fundamental valuation seemed like a bargain, but the most seasoned warned that this label had been waiting for a purifying fire for years that never came. Buy scenarios were drawn with concrete figures: partial entry in the current zone, increase if it fell to 2.2-2.3 euros, and a long-term target of 3.5 euros. On the list of fundamentally cheap stocks were Telefónica, Repsol, Iberdrola, BBVA, and Santander. The old guard of the IBEX, always on sale, always debated.

The Day the Bearish Army Surrendered

As the month pogre, the narrative shifted. The S&P 500 came within four points of its historic highs, and European indices trinc suit. The latest messages had a different tone: the selective index was pushing, threatening to break 10,480 and deliver a spectacular end to the month. One participant signed their personal war report, parodying the last communiqué of the Nationalist side in the Civil War: Bearish Army captured and disarmed, bullish troops have reached their final stock market objectives. Date: October 31, 2014. The bloodbath was over.

The Macro Puzzle: US QE Winds Down, Japanese QE Ignites

Behind the rebound was a story of liquidity. The US was closing its debt purchase program while Japan expanded its own, and Europe was caught in the middle, watching inflation without deciding to fully open the tap. The dominant hypothesis was that American improvement and Japanese stimulus would eventually push the Old Continent via exports with a weaker euro, something already hinted at in better-than-expected corporate earnings. EUR/USD rocketed up in the last week, crude oil plummeted, and gold fell sharply. The S&P reached 2,000.

The DAX, Expirations, and the Uncalculable Account

The most methodical risked their credibility with firm predictions. A forecast setting the DAX at 9,300 points eventually came true, with a two-day error and textbook self-criticism. In parallel, options expiration week saw the smooth landing that traders celebrate and others don't understand. There was also room for the other extreme: small-cap stocks rising 15% in a single session while half the market looked the other way. Easy money always leaves someone out.

Those Who Didn't Believe It

Not everyone bought the narrative. The most skeptical closed the month with the same refrain they peine it with: the higher we climb, the more vertiginous the fall will be. Amidst the euphoria of capital gains, another bloc recalled that the money inflating the markets comes from the same system that breaks unemployment records and cuts paychecks. Predictions of a great collapse didn't materialize in October. They were postponed, again, to October 2015. Whoever was right last year will claim it again next year.