The Dax could soon break out of a current sideways movement.
(Photo: dpa)
Dusseldorf The German leading index Dax could be about to start a year-end rally. That is the result of the Handelsblatt survey Dax Sentiment among more than 6000 private investors. Should there be another setback, it might be the last opportunity to buy for the time being.
The mood among investors is therefore good and at 2.8 it is at the level of the previous week (2.9). “The several months of sideways movement could soon dissolve into a continuation of the vaccine rally,” says sentiment expert Stephan Heibel, who evaluates the weekly survey for the Handelsblatt.
The five-week average of the sentiment also speaks in favor of rising prices: This is currently at a relatively low minus 1.7. “In the past, this value has often proven to be a good indicator of rising prices,” says Heibel. “It doesn’t have to start tomorrow, but according to these sentiment data, we can expect prices to rise in the coming weeks.”
The managing director of the analysis company AnimusX does not want to rule out a further setback in the meantime, but at the same time explains: “In my opinion, that would be a last opportunity to buy before the Christmas rally.”
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What matters is that the five-week average apparently bottomed at minus 9.3 two weeks ago and is now rising. In the past, this constellation was often an indication of rising prices: During the corona crash, for example, the value reached its lowest level in the last week of March (minus 31.1) – a week after the Dax had also hit its low. Then both the Dax and the five-week average worked their way up again.
Basically, the following applies: the deeper the value falls, the longer the rally can last. It was similar in early November of last year when the five-week average slipped into the red and bottomed out at minus 11.9 just before the vaccine rally started.
The now rising five-week average could therefore be a sign that the autumn correction ended with a setback to 14,819 points at the beginning of October. Since the Dax temporarily slipped below the 15,000 mark, it has risen to currently around 15,600 points. This upward trend remained intact despite the small weekly minus in the past week, as the leading index achieved both higher weekly highs than in the previous week (15,615 versus 15,599 points) and higher weekly lows (15,407 versus 15,012 points) – the classic definition of an upward movement.
This creates a good mood among investors. For 76 percent of those surveyed had fully or largely met their expectations in the past week. As a result, the level of complacency has risen to 2.2. This value is as high as it was last in mid-April. Then the Dax initially fell slightly, but then rose above the 15,600 point mark for the first time.
At the same time, expectations for the future are currently high: in the previous week this jumped to the extreme value of 5.2 and has now returned to a tolerable level of 3.8.
The willingness to invest has moved in a similar manner, falling from 3.8 to 2.7 on a weekly basis. Almost two thirds of those surveyed did not know when they voted whether they want to act this week.
In principle, such positive values do not speak in favor of rising prices, explains Heibel: “Usually stock markets rise ‘on the wall of fear’. Problems are therefore often the prerequisite for rising prices. The solution to the problem often marks the top in the stock market. ”The continued high level of investor confidence does not quite fit this theory.
This contradiction is resolved by the preliminary results of the AnimusX survey, which also includes the investment rate. This has fallen by 14 percentage points to 37 percent. So investors downsized their positions over the past week. In return, their cash quota has increased slightly.
At the same time, their short quota has also risen a little. This can be seen in the Euwax sentiment of the Stuttgart Stock Exchange, on which private investors trade. This has slipped slightly into the red. Investors have therefore taken initial hedges in order to secure the price gains. Inflation concerns, supply chain problems, rising corona numbers and tensions with China are seen as negative factors.
“That means there are a number of investors who see a preliminary high in the current prices, have bagged their profits and are speculating with a small part on falling prices,” explains Heibel. If these investors fail to meet expectations, they could chase the rising share price and continue to fuel the rally.
Location in the USA
The put-call ratio of the Chicago futures exchange Cboe shows long speculations on the US stock exchanges – that is, bets on rising prices. That fits in with the US fund managers who have increased their investment quota from 64 percent to 98 percent.
US private investors are also optimistic: The bull / bear ratio is 19 percent – the number of respondents who expect prices to rise is 19 percentage points larger than the group who expect prices to fall and shows a clear bull -Overhang on. At 46.9 percent, there are also significantly more bulls on the road than in the past six months.
The technical fear and greed indicator of the S&P 500 shows slight greed with a value of 69 percent. “That is a significant increase compared to the past few weeks, when fear dominated,” says Heibel.
The S&P 500’s short-range oscillator – an indicator that takes into account a number of related variables in trading data – has also risen significantly: the current value of 4.5 indicates an overbought state of the market and warns of a short-term consolidation
Other asset classes
Bitcoin: The cryptocurrency has reached a new record high of 66,930 dollars in the past few weeks, and the cyber currency is currently around 63,000 dollars. According to the results of the Handelsblatt survey, caution is now called for. “The last time the mood was so high, a correction that took several months followed,” warns Heibel.
Oil: On the oil market, the prices for the North Sea variety Brent and the US variety WTI are currently reaching highs of several months: The price for Brent rose by around ten percent on a monthly basis and that for WTI by around twelve percent. The euphoria on the market is greater than ever – a warning signal, which is why Heibel advises: “Caution with regard to the oil price development is advisable.”
There are two assumptions behind surveys such as the Dax sentiment with more than 6,000 participants: If many investors are optimistic, they have already invested. Then there are only a few left who could still buy and thus drive prices up. Conversely, if investors are pessimistic, the majority of them have not invested. Then only a few can sell and thus depress prices.
Would you like to take part in the survey? Then you will be automatically informed about the start of the sentiment survey and sign up for the Dax Sentiment newsletter. The survey starts every Friday morning and ends Sunday noon.
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