The past week of trading was extremely nerve-wracking for investors. How will it go on?
(Photo: dpa)
Dusseldorf The nerves of investors are gradually on the edge, at the same time polarization is increasing: Either there could be a crash or a Christmas rally develops. There doesn’t seem to be much leeway in between. This can be deduced from the many extreme values in the Handelsblatt survey Dax Sentiment.
Above all, the high investment rate and the very low cash balance among investors are striking. For the sentiment expert Stephan Heibel, who evaluates the survey on a weekly basis, there is only one conclusion: “This means that the Dax is very susceptible to another sell-off, which could briefly but heavily ensure that many investors throw their positions on the market.”
Even a single negative message could cause this sell-out, for example if there were more deaths in the supposedly less dangerous Omikron variant.
In Heibel’s opinion, the way would then be free for a Dax catch-up, and new record highs would then be possible again in the new year. If, however, there are no more bad news, the stock market could move sideways for a while.
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On the other hand, the buying intention among investors is so great that any setback should end quickly. And a look at the history of the sentiment survey since 2014 shows that such a constellation gives wings to the Dax and that the index has always risen above average afterwards. However, despite the high willingness to buy, the question remains: What do investors want to buy with when their cash holdings are so low?
Sentiment values for the gold price are still too moderate
The gold price fell sharply in the past week. The support at $ 1,800 per troy ounce (31.1 grams) was breached on the downside, and sentiment also collapsed parallel to the price drop.
Gold sentiment is currently on the threshold of extreme depression, while gold expectations are moderately bullish. “Although this is constructive for prices that will rise again in the future, it requires a little more extreme values to derive a recommendation for action,” says the sentiment expert.
The oil sell-off is likely to end soon
The oil price slump, which was derived precisely from the sentiment data six weeks ago, should end soon. Because the current survey shows extreme dejection paired with a jumped optimism for the future. Such a combination often ensures a stable floor and thus an end to the multi-week sell-off.
Bitcoin is not yet stable
The price stabilization for Bitcoin has already caused sentiment to skyrocket. The optimism for the future remains at a high level. Heibel drew the conclusion from the survey even before the price collapse on Saturday: “A stable floor on the basis of which new highs could be climbed has not yet been formed. The correction happened too quickly and generated too little fear.”
Current sentiment survey data
Despite the stressful trading week for investors, sentiment has recovered a little to a value of just minus 2.4. While the sell-off a week ago after the publication of the Omicron mutation from South Africa caused a touch of panic, investors have now come to terms with the high volatility.
However, there remains a great deal of uncertainty with a value of minus 5.7 among investors. Neither a crash nor new all-time highs can currently be ruled out until the end of the year. Accordingly, investors are unsure of whether their positioning is good.
From a three-month perspective, however, expectations are clear: with a value of 4.7, the bulls dominate the action. It’s the most bullish reading in a year since the vaccine rally kicked off in November 2020. Perhaps one can infer from this great optimism that investors also consider the omicron mutation to be manageable.
Many have built positions in the sell-off. The willingness to invest was already very high a week ago with a value of 3.7. The decline to a current value of 2.3 allows one to conclude: Many investors are now fully invested.
This is also confirmed by the more detailed AnimusX survey: According to their data, the cash quota has fallen from the already extremely low level of 19 percent in the previous week to eleven percent. Even if investors wanted to take advantage of another sell-off to collect more stocks, they would not have much cash left for it.
The Euwax sentiment of the Stuttgart Stock Exchange, on which mainly private investors trade, has risen to plus four and shows an increasing willingness to take risks. Positive values indicate that there are more call than put products in the portfolios of private investors, which means that increasing prices are being relied on.
So the picture has turned. In November, private investors still had many put products in their portfolios in order to hedge against price losses. But they apparently expect a continuation of the Dax rally.
Data from the USA
The put / call ratio on the Chicago futures exchange CBOE is quoted at a very low level and shows that US investors are still predominantly bullish. Significantly more call options are bought, with which one speculates on rising prices, than put options to hedge against a price slump. In the opinion of the Americans, the Christmas rally will continue soon.
US fund managers sold heavily this week, with the investment ratio dropping 16 percentage points to just 88 percent.
US private investors poured into the bear camp last week: The bull / bear ratio slumped to minus 16 percent. 42 percent of private investors in the USA are pessimistic about the coming six months, only 27 percent are bullish.
The “fear and greed indicator” of the US markets, calculated on the basis of technical market data, also shows extreme fear, almost panic, with a value of just 25. This panic is also a fairly well-functioning technical indicator for the so-called “Short-Range Oscillator”, which now shows that a recovery on the stock markets can be expected, at least in the short term.
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 on Sunday noon.
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