Dusseldorf Despite an impressive rally for more than five months and a 2% gain in the past week, investors remain skeptical. This is shown by the current data from the Handelsblatt survey Dax-Sentiment.
After evaluating the voting data, the expert Stephan Heibel is certain: “The fear of renewed price losses after the weak stock market year 2022 is still present. There is no other explanation for this cautious attitude, despite the good performance on the stock market over the past five months.”
Other indicators such as the Euwax sentiment of the Stuttgart stock exchange or the put/call ratio of the Frankfurt futures exchange also confirm this great caution.
In the US, this skepticism has already turned to fear. The number of pessimists, called bears, is almost twice as high as that of bulls, who expect prices to rise.
Fund managers across the Atlantic have rapidly reduced their investment quota, and many professionals are buying put options to protect themselves against falling prices.
Attentive readers of sentiment analyzes know that such behavior tends to signal rising prices because, to put it simply, there is a lot of money to get started. “Like a stable safety net under the prices, this market mood should immediately absorb any selling pressure,” says Heibel, albeit with one caveat: “if nothing surprisingly negative happens.”
Heibel also has an example for this. After the surprising meeting between Chancellor Olaf Scholz and US President Joe Biden, a change in the previously pro-China course of German politics would certainly be such a negative surprise.
Nevertheless, Heibel sticks to his forecast of the past few weeks: The potential for surprises is still on the upside, provided that no reports change the current framework conditions. “The Dax should continue to rise on days without reports,” he explains. Today’s Monday is a good example of this, because the Dax just barely missed a new high for the year.
Current survey data
Last week’s trading was not for the faint of heart. Although the Dax rose by two percent, it tested its highs and lows twice during this period. Despite the overall good performance, investor sentiment is only slightly up at 0.5 points. In the previous week, this value was minus 0.3.
But investors remain unsettled. After a value of minus 1.9 points in the previous week, the measure of uncertainty/complacency among the survey participants is currently still minus 1.2, despite good Dax performance.
Expectations for the future also remain pessimistic. The value slipped further to minus 0.7. A week ago it was minus 0.5. Apparently, skepticism among investors is growing. Fewer and fewer still believe in rising prices in three months. The willingness to invest has fallen to plus 0.2 and is thus at its lowest level for more than a year. The survey participants are apparently in agreement: it will end badly!
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, has risen to minus three. This indicator measures the proportion of leveraged call and put products in investors’ portfolios. If the value is negative, the proportion of puts that investors use to protect themselves against falling prices is higher. If the value is plus, the relationship is reversed.
Since the low point of minus 18 at the beginning of February, the need for new hedging positions against falling prices seems to be decreasing. That may be because there wasn’t a major pullback in those five weeks to sell the put products at a high profit. Accordingly, the fear of rising prices has grown. That would mean price losses for put products.
Institutional investors who hedge via the Frankfurt derivatives exchange Eurex have a put/call ratio of 1.5, which corresponds to a neutral ratio. There, too, the level of hedging has been declining since February. In the US, the put/call ratio rose sharply this week. Apparently, the need for hedging in the US has not yet been met.
The investment ratio of US fund managers has fallen to 47 percent, just two weeks ago US fund managers were 81 percent invested. Here, too, a very defensive behavior among US investors can be seen.
The bull/bear spread for US retail investors remains in the red. The proportion of pessimists, called bears, is 45 percent. On the other hand, 23 percent of respondents are bullish.
The “fear and greed indicator” for the US markets, calculated on the basis of technical market data, indicates a neutral market situation at 54 percent. Other more short-term technical indicators are on the verge of signaling an oversold market and a move northwards. This movement could have started as early as Friday.
There are two assumptions behind surveys such as the Dax sentiment with more than 7,800 participants: if many investors are optimistic, they have already invested. Then only a few are left who can 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 informed automatically 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.