And so it has reverted to the mean

To follow up to the immediately previous post and with a focus on Spain’s IBEX 35.

I also ask readers to reference this link to a post from October 2020, where in amongst my Buy recommendation I made mention that I’ll  watch or expect the IBEX to mean revert to its longer-term 200 Month Moving Average.

Well, the 2 charts attached show the IBEX 35 in a Weekly and a Monthly form and my profit-taking senses are heightened today as the IBEX is touching its 200 Week Moving Average, while the Monthly equivalent is still 11% higher.

This is when you need to think about how to manage this investment position.

And so I ponder, after seeing a 33% return in 7 months, how much risk do I take in trying to squeeze out a further 11% ?

And then compared to an increased probability of an equal 11% decline from today’s price.

May 5, 2021

by Rob Zdravevski

rob@karriasset.com.au