In recent weeks the world and particularly the Spanish stock markets are suffering sharp corrections from recent highs in January, when it gave the feeling that the worst was past, has opened a new front with the emergence of a fiscal crisis large proportions.
This situation particularly affects European countries is caused by the massive debt of states and their high public deficit, worrying levels we see in the following graph:
The result of all this are the drastic measures to cut public spending that governments of the respective countries are taking, largely beset by financial markets.
However, these situations pose a threat to citizens and their welfare also they tend to generate good investment opportunities, such as the one that occurred in March 2009 when the bags took a turn upward that lasted for more than 9 months.
Then the financial sector was among the hardest hit, then recovered with strong gains which reached 200% in some cases (Banco Santander), and now again suffer the punishment of markets.
Are we then to an opportunity like the one above?
For information reaching us, the situation of financial institutions facing serious problems in the increase in bad debts, devaluation of assets, the volume of acquired debt … to which must be added the context of strong crisis environment Spanish economic.
However, analyzing the revaluations from lows of March 2009 and the current correction from recent highs it might seem that we are reaching a “historically” interesting discounts, as the following table shows for banks IBEX:
| Entity | Revaluation | Correction |
| SAINT | 203% | -33% |
| BBVA | 130% | -38% |
| SAT | 75% | -35% |
| POP | 128% | -46% |
| BTO | 93% | -33% |
| BKT | 56% | -54% |
A technical analysis of the price evolution of these entities will give us a vision to help us perceive the suitability or break time to take positions in these securities.
To do this we will compare the graph of the IBEX with the 6 banks that compose using daily charts, Fibonacci retracements ( red lines ) and 200- day moving average -SMA200- ( blue line ).
The first chart shows the IBEX and the 2 major banks (SAN, BBVA), where we see many parallels between graphics. This should not be surprised by the high weight of these banks have in the composition of the index.
[ IBEX, SAN, BBVA]
The technical situation is very similar and are downward in the medium and long term (bearish trends 1.2 and 3rd, with maximum and minimum decreasing and below the SMA200). However, the SAN would have bounced off 50% correction (Fibonacci level), while BBVA has already exceeded this level and is routed to the next level located at 61.8%.
The following chart shows BTO and SAB are bears in the medium and long term (bearish trends 1.2 and 3rd, with maximum and minimum decreasing and below the SMA200). BTO technical situation is similar to that described for BBVA, however SAB already have passed downward recoil 61.8% and would be in an important support.
[ BTO, SAB]
The last graph shows POP and BKT, the two worse, are bearish in the medium and long term (bearish trends 1.2 and 3rd, with maximum and minimum decreasing and below the SMA200); the first addition to having exceeded the level of 61.8% retracement has no support to the lows of March 2009, while BKT is the only publicly traded below these minimums.
[POP, BKT]
The analysis of these graphs shows that the market perceives all these values as risk assets and reflects this in its quotation. Yet it distinguishes between them those with problems (SAN, BBVA), which correspond to entities with greater geographic diversification and turnover, of which could reach them much more serious (BTO, SAP, POP, BKT) by its domestic business and lower volume.
What should we do?
In case you bought, to the perception of weakness (eg minimum loss last that will be accompanied by the loss of IBEX lows to close at 9,000 pts) would opt for hedging the portfolio with appropriate instruments (futures sale IBEX or purchase put options) if you do not want to sell directly.
For taking short positions in liquidity we expect to see any clear sign of sustained rotation and accompanied by the IBEX and global indices.
Warning: the analysis only assesses the possibility of investment in these entities and does not assess their creditworthiness and this should be another type of study.
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