The great uncertainty from the previous week with minus 3.6 points has now disappeared.
(Photo: dpa)
Dusseldorf The current price level on the German stock market is suitable for purchases, although these should be closely hedged. This is shown by the evaluation of the Handelsblatt Dax sentiment survey.
The five-week average is the relevant indicator. This is at its lowest level since the rally began last October. Sentiment expert Stephan Heibel, who evaluates the Handelsblatt survey, explains: “The absolute value of this indicator is at a level that is sufficient for a bottom during breathers as part of an intact rally.”
The indicator has proven its accuracy particularly in bear markets, which are characterized by falling prices and clouded sentiment (see chart). In such cases, it is trading at an extremely negative level, which – to put it simply – signals a capitulation by the sellers. Then just a few purchases are enough to make the prices rise again.
But 2023 is a bull market. Therefore, the five-week average does not have to slip to an extremely negative level in order to derive a trend reversal. In addition, a further significant fall in the five-week average would be a risk in Heibel’s opinion.
“If this line slips further, it could result in a bear market,” explains Heibel. By definition, bear markets arise when prices fall by at least 20 percent. Hence the advice to secure purchases closely.
If positive, there are likely to be significantly higher prices in the coming months. In the negative case, the rally ends and it is advisable to protect yourself against further falling prices.
With sentiment analysis, a so-called “floor” in price development cannot be precisely determined. She can only calculate probabilities. Neither a day nor a week can be defined in terms of time, but only a period of time, which experience shows is one to two weeks. During this period it could remain turbulent until a decision is made.
Current survey data
Investor sentiment fell to minus 3.3 last week. This brings back the bad mood from two weeks ago. The brightening of the previous week was therefore not sustainable.
A week ago, sentiment suddenly took off and buyers took advantage of the low prices to make opportunistic purchases. But for sentiment expert Stephan Heibel this development happened much too quickly a week ago. “It wouldn’t surprise me if the rally, which seems to be a foregone conclusion in the minds of most investors, takes a few more weeks to come,” he explained last Monday. The DAX fell again by 0.6 percent last week.
Uncertainty has also returned, with the survey value falling to minus 3.2. No wonder, many investors who bought opportunistically a week ago were caught flat-footed.
Looking ahead, the survey results show: Optimism for the future has again risen opportunistically to 4.0, the second highest value in a year and a half.
The willingness to invest, on the other hand, fell to 1.3, after 1.7 in the previous week. “That is understandable, because the willingness to invest was very high throughout August,” explains Heibel. According to his more detailed AnimusX survey, the cash quota has now fallen from an extremely high value of 26 percent at the beginning of August to an extremely low value of 16 percent.
The Euwax sentiment on the Stuttgart Stock Exchange is zero, the shares of call and put leverage products on the Dax are almost the same. In August, this indicator was mostly positive. It can be concluded from this that the high willingness to invest in August was mainly used for long speculation, i.e. speculation on rising prices. Hedging positions have largely been liquidated.
Institutional investors who hedge their bets on the Frankfurt derivatives exchange Eurex are optimistic. The put-call ratio has fallen to 1.2, reflecting comparatively strong demand for long speculation.
In the USA, the picture remains the opposite to ours: The put-call ratio on the Chicago CBOE futures exchange has continued to rise and shows an increased need for hedging among US investors. US fund managers have reduced their investment ratio from 61 percent to 50 percent.
The bull-bear difference has increased to 12.6 percentage points. Among US private investors, the bulls dominate again with 42 percent, compared to the bears with only 30 percent. The technical “fear and greed indicator” of the US markets, calculated based on technical market data, stands at a neutral 52 percent.
Strong buy signal on the oil market
Expectations for the future on the oil market are currently particularly positive. Expectations have only been comparably optimistic 14 times in the past 17 years. In the approximately 850 weekly surveys conducted by the analysis company AnimusX during this period, that is less than two percent.
If future expectations were so optimistic in the past, then the price of oil will have risen by an average of a third in the next six months. The remarkable thing about it: All 14 events in the past led to higher oil prices after six months. 13 of the 14 events even led to higher oil prices after just three months. From the perspective of sentiment theory, this is a relatively strong buy signal.
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