IBEX 35 analysis as Santander stock forms a risky pattern ahead of earnings

Spanish stocks have pulled back in 2024, erasing some of the gains made in 2023 even their European counterparts like the German DAX and FTSE MIB soared to a record high. The IBEX 35 index, which tracks the biggest Spanish companies, retreated from last year’s high of €10,305 to a low of €9,900. 

The IBEX 35 index has retreated even after some encouraging reports from Spain. Data by the country’s statistics agency showed that the economy expanded from 0.4% in Q3 to 0.6% in Q4, higher than the median estimate of 0.2%. This growth translated to a YoY increase of 2.0%. 

However, inflation is still a thorn in the flesh for the Spanish economy. The headline Consumer Price Index (CPI) rose from 0.0% in December to 0.1% in January. This increase translated to a YoY increase of 3.4%.

Still, the sharp increase in inflation was expected because of the ongoing crisis in the Middle East that has pushed shipping costs higher. Energy prices have also been relatively higher in the past few weeks. 

There are a few reasons why the IBEX 35 index has pulled back this year. First, Grifols, a major part of the index, was recently attacked by Gotham City, a short-seller who accused it of manipulating its financial results. Grifols has rejected the claims and sued the short seller. But still, its stock has collapsed by over 30% this year.

The IBEX index has also dropped because of Solaria, a clean energy company whose stock has retreated by 28% this year. This decline is mostly because of the ongoing ESG outflows and lack of appetite for these assets. 

Other top laggards in the IBEX index are Acciona, Colonial, and ACS, and Naturgy. On the other hand, the top performers this year are Indra, Ferrovial, Telefonica, and Logista. All these stocks have risen by over 5% this year.

Looking ahead, the next key catalyst for the IBEX 35 index will be the Banco Santander earnings scheduled for Wednesday. The company, which is Europe’s fourth-biggest bank by assets, is expected to report strong results because of the elevated interest rates and moderate delinquencies. 

However, its stock has formed a double-top pattern at €3.94 and moved below the neckline at €3.73. In most cases, this pattern is one of the most bearish signs in the market. This means that it could continue falling to €3.5 after the results. Such a move will drag the IBEX 35 because Santander is the third-biggest constituent.

Santander chart by TradingView

Like the Santander stock above, the IBEX index formed a small double-top pattern at €10,305 between December and January. It then slipped below the neckline of this pattern at €10,000 recently. The index is now consolidating at the 50-day moving average and has formed a small bearish flag pattern.

Therefore, the outlook for the IBEX index is bearish, with the next level to watch being the 100-day moving average at €9,800. 

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