IBEX 35 Forecast: Rising COVID Infections Exacerbates Bearish Technical Picture

The IBEX 35 Index broke down earlier this week along with its counterpart European indices amid a bout of global risk-aversion, as the rate of COVID infections increases across much of Western Europe. Selling pressure has eased in recent days for the IBEX, but current price action appears to lend a technical advantage for bears in the short-term. Currently, the index sits nearly 7 percent lower for September.

IBEX 35 INDEX (15-MIN PRICE CHART)

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IBEX 35 price chart

Chart created with TradingView

Compared to Its regional peers, Spain continues to suffer from an outsized rate of infections. The 14-day cumulative case count per 100k is at 320.0, well above France, Germany, and the U.K., according to the ECDC. Madrid, Spain’s capital city, recently reenacted partial lockdown measures and called for military support to bolster containment efforts.

That said, relative underperformance in the Spanish index may continue given the outsized pace of infections. The IBEX’s performance year-to-date stands at -27% versus France’s CAC 40 at -17%, and Germany’s DAX at -1%. Adding to the deteriorating virus numbers, Markit Economics’ Flash Eurozone Services PMI Activity Index fell to a 4-month low for September.

IBEX 35, DAX, EU 50 INDEXES (DAILY PRICE CHART)

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IBEX, EU 50 Index, DAX 30 Index

Chart created with TradingView

Turning to the technical setup, this week’s slide brought price below its recent multi-month low of 6788.9 set on August 3. The level coincides closely with the 23.6% Fibonacci level. This prior point of support will likely act as resistance on the next upswing.

IBEX 35 INDEX (DAILY PRICE CHART)

(Click on image to enlarge)

IBEX price chart

Chart created with TradingView

Moreover, since August price action pinged the downward trending 50-day moving average several times while setting lower lows. This moving average will likely serve as the next key technical level to overcome should bulls manage to defeat the previously mentioned Fibonacci level. For now, prices may consolidate in a range formed from late March through mid-May. A break below this range would see the index back near its 2003 lows.

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