IBEX 35 pushes against dynamic resistance, eyes 10,000 points

The European stock market remains well-bid despite the European Central Bank (ECB)’s tightening cycle. All major European indices gained so far in 2023.

One, in particular, consolidates ahead of a possible major breakout. The IBEX 35 index, which tracks the Spanish most liquid companies, seems ready for another step higher.

It is particularly interesting that the rally in 2023 comes under conditions of high inflation and high-interest rates. Earlier today, Spanish inflation surprised to the upside, coming out at 2.6% YoY on 2.5% YoY expected. High inflation is good for stocks as long as it does not get out of control.

IBEX 35 prepares for a run to 10,000

Before the COVID-19 pandemic, the Spanish index traded above 10,000 points – a pivotal level. An abrupt selloff of over 4,000 points followed as investors dumped stocks on pandemic fears.

The fears materialized, but central banks and governments stepped in. Both monetary and fiscal policies helped the economy, and once the pandemic ended, stock market investors came back.

The rally from the 2022 lows sent the IBEX 35 index above major dynamic resistance. The breakout point, at the 8,800 level, led to the formation of a consolidation area that is still ongoing today.

However, it looks like the market forms a triangular pattern. Triangles often appear ahead of major breakouts as the market builds energy to push through resistance.

Once above the dynamic resistance given by the upper edge of the triangle, the IBEX 35 index’s next target is the pivotal 10,000 level.

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