The IBEX Index got hammered during the open on Monday, plunging towards the €8200 level. While I do not typically follow the IBEX, it is worth noting that we are starting to see the so-called “death cross” form, as the 50 day EMA is starting points below the 200 day EMA, right where there was a huge gap previously. Furthermore, what I find interesting about this chart is that the €8200 level has been important multiple times in the past, so the fact that we tested it tells me that we need to pay close attention to what is going on here.
Another reason why I am paying close attention to the Spanish index is that the European equity markets in general look soft, so it is likely that we would see some of the smaller indices such as the IBEX see a lot of downward pressure. I am also watching the DAX, because the DAX is the “blue-chip index” that a lot of traders put their money into first. If that starts to fall, some of these peripheral European indices will get absolutely crushed. In other words, if I see the DAX starting to sell off drastically, I am going to get very aggressive to the downside in this market.
While I do not necessarily think that there will be a bullish scenario anytime soon, if we can break above the €8550 level, then we may make an attempt to fill that gap above. That being said, I think the best case scenario at this point will be more of a back-and-forth type of trading opportunity, as we are heading into the end of the year and liquidity will become an issue. Nonetheless, you could say the same thing about almost any index right now, and as liquidity starts to drain away, we could get sudden moves. In fact, if we get some type of selloff due to a news spike, I will short the IBEX, MIB, and a few other smaller EU indices. If we do get a rally here, then I suspect that the DAX will probably go higher, and I do believe that is probably the safer of the two indices to start buying. As far as next year is concerned, a lot of this is going to come down to risk appetite, but unless we get some major “risk on move” around the world, I suspect that the IBEX is going to be a disaster.
