Friday, 22 May 2015

Bullish implications of the IBEX

Whilst many continue to question the current levels of the US equity indexes, across the Atlantic ocean, the most problematic of the EU PIIGS - Spain, is seeing its equity market making another attempt to break/hold the key 12K threshold. A monthly close >12k would strongly imply for much higher levels, not just for Spain.. but all world indexes.

Spain - IBEX, monthly, 20yr


The Spanish IBEX is currently net higher for May by 1.8%, with a rather bullish spike floor candle. First key target is 12K... the peak from late 2009.

Any monthly close in the 12000s should clarify that 15/16K is due by next late spring. A grander target would be 20K by mid 2017... but first things first.... lets see how May concludes... and if June can break/hold above 12000.

Disagree with this bullish outlook? Okay.... but then what about....

China, monthly

Last summer, I made it quite clear, any break >2500 would bode for 3500, and eventually the big psy' level of 5K. The rate of increase in the SSEC was even faster than I had expected, and 5K is viable as early as next month.

The point should be clear, the IBEX is in the same situation as the SSEC was just a few months ago. When you consider the QE of the ECB and low rates, the IBEX looks set to break 12K... and that is about as bullish a signal as it gets.

Looking ahead

Friday will see CPI data, and that should certainly cause some dynamic price action in at least some parts of the US capital markets.

*it is highly notable that the Yellen will be speaking at 1pm on the economic outlook, and Mr Market will be closely listening. I would imagine a press release of prepared remarks to hit the market at 1pm, and a probable Q/A session stretching into the 2pm hour.

Since next Monday the market is CLOSED, there will clearly be some pre-holiday issues.. so expect increasing price chop into the weekly close.

Gold still broadly weak

Yours truly remains more focused on the precious metals than the equity indexes, and I remain short Gold - via GLD. Today saw some moderate weakness, but if the USD can resume higher tomorrow into the DXY 96s, Gold will be highly vulnerable to a major net daily decline.

In terms of near term downside, there will be some degree of support in the mid 114s (equiv' to spot Gold $1190s), but I think its possible we might see a Gold -$15/20 day... with GLD 113s. If so, I will certainly close out the short into the long weekend. As ever... its rarely boring :)

Goodnight from London