IBEX Forecast October 17, 2014, Technical Analysis

The IBEX as you can see initially fell during the course of the day on Thursday, testing the €9400 level. However, we got a significant bounce from there and formed a massive hammer. This hammer of course does in fact suggests that we are going to get a bounce from here, but we need to clear the €10,000 level at the very least to start buying, and truthfully we believe that the market probably needs to clear the €10,300 level to feel completely confident.

Ultimately, remember that the Ibex is so-called “frontier” or “peripheral” territory, as the Europeans will move money from Germany to Spain when it comes time to take advantage of risk appetite. Risk appetite suggests that some of these other markets will continue to have money flow into them if we can continue to see a bit of stability in general. If the DAX does well, typically the other markets such as the IBEX or the MIB will do even better because the returns tend to be quite a bit higher. After all, it is essentially “higher alpha.”

With this, we believe that this market will continue to attract money, but at this point in time it’s very likely that we will consolidate in this general vicinity first, as any time you have a sell off like this the market typically has to bounce around in order to calm enough nerves to bring in buyers. After all, it is a gradual process for the markets to go from bearish to bullish again, but ultimately these things do happen, and quite possibly offering buying opportunities on longer-term charts.

The shape of the candle does suggest that we should continue to see buyers come into play, but it’s only a matter of time before volatility returned so you have to be willing to hang onto the trade for a longer amount of time as it may offer quite a crazy ride higher. If we do get the breakout though, we feel that this market will more than likely head towards the 11,100 level.