It is a market phase characterized by great uncertainty.
(Photo: dpa)
Dusseldorf The stock market year 2022 is an unusual one: Since the beginning of the year, the Handelsblatt survey Dax-Sentiment has only had a good mood among investors for three weeks. A majority of those surveyed only saw an upward trend in the leading German index three times: in the first week of January and in the first two weeks of August. There has never been such a permanently bad mood since the survey began in 2014.
Actually, this bad mood is a contra indicator, because many investors should already have sold. But for Stephan Heibel, after evaluating the survey, one thing is certain: “The current sentiment data does not yet give a concrete signal. The negative sentiment is not yet extreme enough to derive a turnaround on the stock market.”
The starting position for the German stock market worsens with a look at the investment ratio, which Heibel establishes on the basis of his more extensive AnimusX survey. This rate is surprisingly high, cash is currently held by only a few. “So there’s no double bottom for a sell-out,” he explains. It is therefore to be feared that the downward momentum of last Friday will continue at the beginning of the week.
A low cash ratio is a significant indicator. That was the reason last year why the Dax was not able to sustainably break the 16,000 point mark from August 13 to September 7, 2021. This was followed by a price slide before the Dax was able to sustainably break the mark at the beginning of November and reached a new record high of 16,250 points.
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The Dax slipped by 4.2 percent in the past week, which means that the recovery rally from the beginning of July to the end of August is over. On Friday, US Federal Reserve Chairman Jerome Powell reiterated that fighting inflation was his top priority. And so the stock markets dived sharply at the end of the week.
Current survey data
One thing to note about the current poll data is that investors voted half before and half after Jerome Powell’s speech. “After the speech, the survey responses were much more pessimistic,” explains the Animusx CEO.
Sentiment has fallen from minus 1.4 in the previous week to currently minus 4.1. Accordingly, there is renewed uncertainty among investors. After a value of minus 0.9 in the previous week, the indicator is currently trading at minus 3.7.
The future expectations are in negative territory, the bears have the upper hand with a value of minus 0.6. A majority therefore also expects the Dax to move downwards at the end of November. At least the willingness to invest remains moderate with a value of plus 0.7.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, has recovered significantly in the past few days from minus 15 to minus five. This drop means that many put products have been sold. Private investors had evidently not trusted the rally since the beginning of July and had hedged against price losses. Some of these hedges were already unwound last week as prices tumbled.
The put/call ratio on the Frankfurt derivatives exchange Eurex is 1.4 percent and is therefore in the neutral range. The Chicago futures exchange CBOE is also in neutral behaviour, the CBOE’s put/call ratio stands at 0.59. The investment ratio of US fund investors has fallen to 55 percent and shows the continued defensive positioning of US professionals in the financial market.
The bull/bear ratio for US retail investors has fallen to minus 14 percent. 28 percent bulls versus 42 percent bears. Pessimism has also taken hold among private investors in the USA. The “fear and greed indicator” of the US markets, calculated using technical market data, shows a neutral condition at 44 percent. Other short-term technical indicators are still in neutral territory.
Other asset classes
Gold: The sentiment on the gold market remains constructive. There, a bad mood meets positive expectations. Investors are ready to invest more in gold.
Crude oil: The oil market is not looking so good. Neither the mood nor the expectations are particularly positive. The oil price is falling, which is causing a bad mood and there is no end in sight. According to Heibel, the final sell-off is missing to shake the last hesitant investors out of the market and form a base from which prices will rise again.
Bitcoin: The expectation for Bitcoin has fallen to a new all-time low. “Now the structure of the largest cryptocurrency is finally being questioned, which for me is the first sign of a bottoming out,” says the sentiment expert. Experience has shown that a final sell-off in this market occurs very quickly, often with low volume over the weekend.
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.
More: Investors make these ten mistakes from the point of view of stock market psychologists.