IBEX 35 price forecast ahead of the Spanish elections

On Sunday, July 23, Spain will vote in a general election that sparked many controversies. The left (PSOE) is challenged by the right (PP) in what appears to be a fight that might lead to a new government.

A lot is at stake, and the outcomes are far but certain. There is a very good chance that the elections will result in a right-wing majority made of PP and Vox, but also a hung parliament or a majority for left plus regional nationalist parties is possible.

This @elpaisinenglish is what you are looking for re the Spanish elections. Good chance for a right-wing majority. Hung parliament or majority for left + plus regional nationalist parties certainly possible, too pic.twitter.com/ODVIvJwLao

— Steffen Lüdke (@stluedke) July 20, 2023

Under such uncertainty, one should not be surprised that the local stock market index, the IBEX 35, did not go anywhere in the past month. Here is an article posted on Invezz about a month ago when the index traded more or less around the same levels. In other words, no one is willing to take a chance until the final outcome of the general election is known.

Also, the European Central Bank (ECB) will deliver its monetary policy next week, only a few days after the election result. The market expects the ECB to continue to tighten its monetary policy and hike the key interest rates again.

With a population of 47.3 million people or about 10% of the European Union’s population, Spain has one of the most dynamic economies in Europe – certainly among the fastest-growing ones. Moreover, inflation has already dropped below 2%, the ECB’s target, so political uncertainty will derail the growth pact. Furthermore, the jobless rate is falling.

IBEX 35 keeps a bullish bias while above 9,000 points

Not much has changed since one month ago when we revisited the IBEX 35 daily chart. One can see that the market did make a new high above 9,600 points, but it was met with selling orders only.

However, the subsequent decline failed to break the series of higher lows. Therefore, the bullish bias remains intact, and the general election’s outcome might be just what the market needs to break higher.

On the flip side, bulls should closely watch the 9,000 level. It provided support twice after the market was rejected at the highs, meaning it is a pivotal area. A break and daily close below should invalidate the bullish pattern.

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