The past few trading days have been extremely nerve-wracking for investors. How will it go on?
(Photo: dpa)
Dusseldorf The leading German index rose on Monday after temporarily losing up to four percent in the previous week. But that doesn’t change the negative outlook: A rally to new record highs is not expected in the coming weeks. A possible recovery should also be over quickly, according to the result of the Handelsblatt survey of Dax sentiment among 6,500 private investors. Sentiment expert Stephan Heibel is certain: “It has to get worse before the Dax forms a sustainable basis.”
The scenario in which prices will probably fall again soon can be determined by two survey data: the high investment rate and the great optimism about the future.
The high investment rate among private investors means that they have little free capital left to drive prices up with new purchases. Some investors generated a little cash in the past week. But year-on-year, the investment ratio is still at an extremely high level, according to the survey data from the analysis company AnimusX.
The general state of the market is oversold, the Dax has fallen too low too quickly. This tends to signal rising prices again. “However, the very high investment rate shows that the recovery will probably not last too long,” explains Heibel. A sustained bottom formation after panic sell-offs looks different.
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The great optimism about the future, in combination with the high cash ratio, is also considered a counter-indicator. “If all investors are convinced of rising prices and already have a lot of shares in their portfolio, then who should take care of rising prices?” Heibel asks rhetorically. Therefore, the sentiment expert warns of a persistently volatile time on the stock exchange.
A similar situation existed last summer. At that time, too, there was a high investment rate paired with great optimism about the future. In the months of August and September, the leading index tried in vain to sustainably break the 16,000 point mark. This situation was resolved with a drop of more than 1000 points.
Euphoria on the oil market, pessimism about Bitcoin
The capital that was withdrawn from the stock market last week and thus caused prices to fall was put into the interest rate market. The investment rate has jumped there. Bond prices have risen due to greater demand, causing yields to fall.
Caution is called for in the oil market. There is an “extremely bullish” mood there, an indicator that prices will soon fall again. Oil shortages and tensions in Ukraine with Russia, one of the largest oil exporters, have had an impact on the price. “It is now too late to speculate on a further rise in oil prices,” says Heibel. However, it is not possible to tell when the oil price will top out. That could be a week or two in coming.
In contrast to the oil market, the mood in the crypto world is very pessimistic because the Bitcoin price has been falling significantly for some time.
But here too, as on the stock market, expectations for the future have not yet collapsed. That is why there is still no sustainable bottom in sight for Bitcoin either.
Current survey data
Investor sentiment has risen to minus four from minus 5.3 the previous week. But the fact remains: he is still extremely pessimistic.
Uncertainty also remains high at minus 4.2. There is fear: the price losses are still to be absorbed, because the Dax is only around six percent below its record high. But a further slide would quickly activate the correction mode, i.e. instead of betting on a recovery, investors would prepare for further price losses, which would then accelerate a sell-off.
Investors don’t think it’s that far yet. Because a majority of them expect better courses in three months. The future expectation is listed in bullish territory with a value of 1.7. Optimism prevails at the current price level. Therefore, there are more and more investors who want to use these courses to buy. Willingness to invest has increased to 1.4.
The Euwax mood of private investors is listed with a value of two in neutral territory. This value of the indicator means: Speculations on rising and falling prices are balanced at the Stuttgart Stock Exchange. In the previous weeks, purchases of put derivatives, which investors use to protect themselves against falling prices, dominated. The current mood means that investors feel adequately protected at the current price level.
The put/call ratio of the Frankfurt derivatives exchange Eurex is listed at 1.8 and indicates an increasing propensity to hedge among professionals. In the US, the put/call ratio on the Chicago futures exchange CBOE is trading at one in neutral territory.
US fund investors further reduced their investment quota from a comparatively low 57 percent to 53 percent. So there is plenty of liquidity waiting to be deployed. Fund managers always feel obliged to use the money entrusted to them, according to the motto: Anyone can hold cash. This increases the pressure on US fund managers to get back on board when the first signs of the turbulence calming down.
US retail investors have a bull/bear ratio of minus 30 percent. 53 percent expect falling prices, the greatest pessimism in a year.
The “fear and greed indicator” of the US markets, calculated using technical market data, shows slight fear with a value of 33 percent. Other short-term technical indicators such as the “Short Range Oscillator” of the US stock exchange barometer S&P 500, on the other hand, have already reached extreme values: minus ten signals an oversold state of the market and thus indicates a countermovement.
The US market constitution was last so weak in 2018, if you exclude the corona crash at the beginning of 2020. At the time, Fed Chairman Jerome Powell announced a whole series of rate hikes and the announcement alone caused a sell-off on the markets.
There are two assumptions behind surveys such as the Dax sentiment with more than 6500 participants: If many investors are optimistic, they have already invested. Then only a few are 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 the courses.
Do you want to take part in the survey? Then let yourself be automatically informed about the start of the sentiment survey and register for the Dax sentiment newsletter. The survey starts every Friday morning and ends on Sunday afternoon.
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