Summary:

• Catalonia crisis a “political win” for Rajoy
• SPA35 has pulled back to retest a key level at 10395
• The market broke strongly higher on Monday

Whilst it may be a little premature to declare the Catalonia crisis over for Spain, there is a growing feeling that the worst is passed with the central government taking direct control of the region and former President Puigdemont fleeing to Belgium. 

The response of Spanish president Mariano Rajoy has seemingly been well received by with latest polls suggesting his popularity has risen since the start of October. Before the crisis Rjoy’s popularity ratings were in the doldrums and when unsavoury scenes of police brutality were seen around the globe as they attempted to prevent people from voting in the unconstitutional referendum there was a chance these would fall even further. However, since then his response has been seen as firm and fair and a survey by Sigma Dos on October 31st showed that the popularity of his Partido Popular has risen since September. The party previously enjoyed a 4.4% lead over rival socialist party PSOE and this has improved to 5.5%. 

There’s been some notable weakness in the SPA35 today, with the benchmark falling back to retest a key level at 10395. This region marked a strong resistance zone throughout much of October and provided a ceiling to any advances. Therefore Monday’s break was a major bullish development and as long as the market remains above 10395 there could be further gains ahead. The 8 and 21 EMAs are now in a positive orientation and the 8 is currently not far from today’s low around 10395. 

 

 The SPA35 made a major break higher on Monday but has since revisited the key 10395 level. Source: xStation

 Shorter term timeframes show buyers stepping in to defend this level at 10395. Source: xStation