A market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf The German stock market is in the usual first phase of a recovery rally. And the current data from the Handelsblatt survey Dax-Sentiment and other indicators signal: The coming trading days will remain exciting.
The Dax rose by three percent last week because gas is flowing back to Europe through the Nord Stream 1 pipeline. It was the best trading week since mid-March. Worst fears of a deep recession have now given way to hopes of a mild recession.
But the new sentiment data shows that investors do not trust this development. Although they welcome the price gains, hardly anyone is convinced that the stock markets have seen their lows.
While short-term sentiment has improved, it remains deeply negative overall. The high level of uncertainty also remains, which leads to the conclusion that the rising prices have surprised many investors. In addition, expectations for the future have fallen.
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Nevertheless, according to sentiment expert Stephan Heibel, these data suggest that the recovery rally can continue a little longer. Because such doubts are necessary for a sustainable upward movement. Prices rise against a wall full of doubts – the “Wall of Worry” – that is the appropriate stock market buzzword.
Very often in the past a bottom was formed by speculators in the first phase of a recovery rally. Long-term investors or investors with conviction, on the other hand, initially doubt sustainability and often only return later, when the biggest profits have already been made.
Another aspect, however, speaks against further rising prices. According to the more extensive sentiment survey Animusx, the cash ratio fell from extremely high to extremely low within a few days. This means that many investors have positioned themselves long in the rising prices of the past week in order to benefit from the rally. You have therefore bet on further rising prices. In contrast, the short rate remains low.
For Heibel, this is “a very fragile starting point, because there are still no investors with conviction”. Bad news could again lead to panic on the stock market. Then the long speculation would quickly be resolved and the Dax could go back to diving.
From the Animusx data it can be deduced that there is hardly any new impetus for further profits from Germany, because most domestic investors are already heavily invested. For a continuation of the recovery rally, foreign investors would have to rediscover the German stock market.
According to the sentiment expert, the chances of this happening are not bad. After German stocks were recently avoided in light of the threat of a gas freeze from Russia, averting the worst-case scenario – namely an immediate delivery stop – could lead to international investors looking for cheap stocks that are not dependent on gas. Then they could invest in the German market again.
Dax sentiment survey data in detail
Investor sentiment has jumped sharply, from minus 6.2 to 2.5. The barometer has thus left the area of extreme depression. But joy has not yet arisen. Uncertainty remains high with a value of minus 3.5 after minus 5.7 in the previous week.
Future expectations have fallen to minus 1.0. It seems clear to every investor that the current recovery rally is temporary.
After all, the willingness to invest increases to plus 2.0. At the same time, the short rate is very low. Survey participants want to benefit from the recovery rally and are willing to bet on rising prices.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, has fallen to zero. This means that there is a balanced ratio of call and put leverage products on the Dax in the depots, which can be used to speculate on rising or falling prices.
The put-call ratio on the Frankfurt derivatives exchange Eurex shows that institutional investors are more willing to take risks. With a value of 1.0, more call options are currently being traded than the average of 1.6 in the past few months.
In the USA, too, the put hedges are being unwound, with call speculation dominating instead. The put-call ratio of the Chicago derivatives exchange CBOE is again below the average of the past few months.
US fund investors recently increased their investment rate from 27 percent in the previous week to 44 percent. The historically low investment rate of the past few weeks has subsequently turned out to be wrong, especially in the USA. There, the world’s most important stock market barometer, S&P, reached its previous low in mid-June. In the case of the Dax, this only happened three weeks later.
Among US retail investors, the bears are fleeing the camp. Just two weeks ago, 53 percent of US private investors were expecting falling prices, now it is only 42 percent. The bull camp gained by the same amount.
The “fear and greed indicator” for the US markets, calculated using technical market data, shows only moderate fear at a value of 40 percent.
Oil price is about to bottom out
The mood on the oil market has plummeted in recent weeks. Expectations for the future are also extremely negative. Both values that suggest a price level of 40 to 50 dollars per barrel (159 liters).
The oil price only fell from 120 to 100 dollars per barrel. According to the sentiment analysis, this slump in sentiment is a contraindicator and, according to Heibel, should “limit further price declines”.
There are two assumptions behind surveys such as the Dax sentiment with more than 7,000 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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