Only a few investors currently have enough courage to buy.
(Photo: dpa)
Dusseldorf There are currently two extremely different expectations on the stock market. On the one hand are the private investors. You have a high investment ratio, so you can no longer buy many shares. They expect prices to rise and even speculate on them with high-risk leverage products.
On the other hand, there are professionals with a comparatively low number of stocks in their portfolios. They feared worse on the markets and therefore hedged against falling prices on the futures markets both in Germany and in the USA.
What conclusions should investors draw from this? For the sentiment expert Stephan Heibel before today’s stock market launch: “As a rule, one trusts the professionals, while the private ones are often seen as a counter-indicator. This view speaks for further pressure on share prices.”
Nevertheless, after evaluating the Handelsblatt survey Dax-Sentiment and other indicators, Heibel does not believe in a further sell-off that should cause the Dax to slip below the 14,800 point mark in the long term. His main argument: The five-week moving average of sentiment, a reliable indicator of trend reversals in the past, is trading at an extremely negative level and is therefore more of a signal for a bottoming out. This makes a sustained slide below the 14,800 point mark unlikely.
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A week ago, the sentiment expert had warned of “a dangerous state of the market” for the Dax: little upside potential, great downside risk. Investors would have to hope that prices will continue to move sideways for a while. Accordingly, the Dax fluctuated in a trading range between 15,000 points on the bottom and 15,600 points on the top last week.
Even though the Dax slipped towards 14,800 points on Monday, Heibel expects the leading German index to return to this 600-point range soon. Because the professionals are likely to dissolve part of their hedging transactions and get on board.
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More than 15,600 points should not be possible. Because the investment ratio of private investors even increased slightly last week and is still at a high level. According to the more extensive survey by the analysis house, many investors are more likely to consider selling if the Dax should reach the upper end of the trading range at 15,600 points.
Current survey data
With the sideways trend of the previous week, investor sentiment has also brightened a little. Investor sentiment rose from the extreme of minus 4.8 to just minus 3.0, overcoming the extreme despondency of the previous week.
Investors are still in a bad mood, but there are still plenty of reasons for that. Inflation threatens to get out of hand, the successful growth stocks of the past two years are being sold off mercilessly, and at least in this country, relaxation of the corona virus still seems a long way off.
In addition, there were concrete war warnings at the weekend: Russia could invade Ukraine as early as this week. In the USA, the indices collapsed on Friday evening as a result of this report, the European stock markets were already closed by then. The Handelsblatt survey ran until Saturday evening, so this development was still partially taken into account in the survey results.
The uncertainty that has weighed on investors for weeks has also receded: the value was still minus 4.6 in the previous week, and it is currently minus 1.9. Such a minus value means that nobody is satisfied with the current stock market development. Nevertheless, the Dax did not fall below 15,000 points in the first two weeks of February, and the risks of a bear market have decreased.
But there is no optimism. The future expectation of the Dax in three months is still neutral with a value of plus 0.5. The number of bulls and bears is almost the same because there has always been a slight overhang of optimists since the survey began in 2014.
Accordingly, the willingness to invest also remains at a low level of 0.9. Few investors already have the courage to buy.
The Euwax Sentiment of the Stuttgart Stock Exchange, where private investors trade, shows moderate optimism with a value of plus four. Many private investors who speculate with leverage products on the Euwax are probably of the opinion: the worst of the January correction is over. Because a positive value indicates a surplus of call derivatives against put products, which gain in value when prices fall.
The professionals who speculate on the Frankfurt derivatives exchange Eurex have a different view. For them, the January correction is far from over. Because the put/call ratio has jumped to 2.4 and shows a clear overhang of the put hedges. Professionals protect themselves against further price losses.
The situation is not as extreme in the USA, but the trend is similar: The put/call ratio of the Chicago derivatives exchange CBOE has risen to its highest level since the corona crash and signals an increased hedging tendency on the part of US investors. US fund managers have left their investment ratio at the low level of 67 percent. These professionals also prefer a defensive gait.
As in Germany, the fears of private investors in the USA have diminished a little. The bull/bear ratio has normalized from minus 30 percent to minus 11 percent. More than every third private investor expects prices to fall, while almost every fourth expects prices to rise. At 40 percent, the camp of neutrals is larger than it has been in a year. In other words, investors currently have no idea in which direction the stock market is going.
The US markets’ fear and greed indicator, which is based on technical indicators, is trading at 37 percent and is thus in neutral territory. The same is true of other short-term technical indicators in the US.
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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