The lbex 35 it has just added five consecutive weeks to the rise. A winning streak, the longest for the index so far this year, that has raised its graph to maximums of the last 14 months. From its current listing, only 10% remains to return to prices prior to the outbreak of the pandemicBut what do you need to take this step?
Analysts point out that now the distance to the 10,000 point border it’s only one step, but this could be giant. The success or failure of the ascent to this level and the eventual speed of achieving it will largely depend on how the long-awaited economic recovery progresses.
This implies having to deal with fears of overheating that would force central banks to withdrawing stimuli early and putting the complex balance at risk that sustains the comeback. And, in addition, in the case of the Ibex, the recovery of a certain normality for the still far behind tourism sector.
Not just banks
The analyst Darío García, from XTB, explains that “we would have to wait for a certain balanced behavior among all sectors unanimously”To see the Spanish index rising towards its prices prior to the arrival of Covid-19 in Europe. And it is that, although it highlights that a good impulse will come through the improvement of the banking business that augurs a rebound in industrial and consumer activity, his solo push would fall short.
“The 10,000 points are still a long way off, because although it did not take so long to recover the 9,000 points, now a significant contribution is required from sectors such as utilities, banks, construction companies, infrastructure and tourism ”. Of course, it stands out that this composition that last year condemned the Spanish index to be the worst in Europe, so far in 2021 has placed it at the forefront of the comeback.
Nasdaq and hospitals
For the independent analyst Roberto Moro, “The key is that the technological ones endure”, something that the recent escalation in inflation has cast doubt on by imposing strong corrections in recent days on the Nasdaq index. In his view, this continuity is key for equities to continue to gain momentum on a global scale.
With this perspective, he considers that “as long as the Ibex 35 retains 8,700 points”, an eventual corrective episode would not jeopardize the continuity of progress either, which now has an initial bullish target at 9,300 integers. However, Moro explains that the “banking sector can help it rise even higher” and levels can be seen above 10,100 points in the medium term.
Technical analysis of the Ibex 35. Eduardo Bolinches
In this medium term is where the factor of the evolution of the coronavirus crisis comes in, both in health and finance. Thus, in addition to avoid new confinements or the return of social restriction measures, it is key that the loans with which the companies have remained afloat during this time – often through public guarantees – do not become unpaid debts due to bankruptcy.
Thus, although the graph may suggest that the achievement of 10,000 points could be just around the corner, it should not be forgotten that so far this year the Ibex 35 ‘only’ has gone up 13%. And with that percentage it has enough to be the leader among its European neighbors, which last year suffered a lesser setback and in some cases are even at all-time highs, as is the case with the German DAX.
Resistances to beat
In this sense, Invertia analyst Eduardo Bolinches explains that -by pure application of technical analysis- “The double floor created in 2020 in the Ibex points to 11,030 points as a target”. An ambitious ceiling that corresponds to its highs since 2017. With the application of shorter-range parameters, it indicates that the first level to beat is at 9,200 points and, later, “We play it very seriously at 9,550 points”.
From there until the breaking of the psychological frontier of 10,000 integers, Bolinches warns that before it would be necessary to successfully resolve the confrontation with the 9,630 points that marks its monthly closing resistance. Although it warns that when passing through this reference “there could be an attempted twist”, it shows optimistic about the momentum of the bank -including its two heavyweights- and the friendly technical aspect that two blue chips like Telefónica and Inditex have just released.
The chief investment officer of Axa Investment Managers, Chris Iggo, explains that although the inflationary fears that threaten to slow down the recovery of the stock markets could last “a couple of quarters” due to the lag in the adjustment of the supply of raw materials, he believes that “the tensions should be temporary” and that the most successful strategy continues to be “overweight equities and credit ”.