Should you buy the IBEX 35 index as Spanish inflation reaches the 2% target?

In a week when the European Central Bank (ECB) holds its annual forum on central banking in Sintra, Portugal, some excellent news on the inflation front comes from Spain.

The Spanish inflation fell below the ECB’s 2% inflation target for the first time since the COVID-19 pandemic, after peaking at 10.8% in July 2022.

The disinflationary process was as fast as the inflationary one, and the news is encouraging for the ECB, which strives to reach the euro area’s 2% inflation target.

So how is the disinflationary process viewed through the eyes of investors in the Spanish stock market?

IBEX 35 builds energy to break above the 10,000 points level

Since bottoming in 2022 at the 7,200 level, the Spanish IBEX 35 index rallied all the way to the 9,600 one. After being rejected several times from the horizontal resistance, it builds energy to break higher.

Moreover, the technical trader may see that the market failed to break the series of higher lows on each rejection. It means that an ascending triangle forms on the daily timeframe, so a bullish breakout is in the cards.

Its measured move, seen in orange above, equals the longest leg of the triangle and exceeds 900 points. As such, if we project it from the horizontal resistance level, the IBEX 35 index has room to advance to 10,500 after the triangle breaks higher.

The news that inflation fell below the ECB target in Spain should be bullish for the local stock market. It appears that it is only a matter of time until the 9,600 level is broken as investors keep bidding for European stocks.

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