Dusseldorf A veritable sell-off took place on the German stock market at the start of the week. The Dax slipped more than 400 points at times on Monday, but then recovered again.
The market is relatively close to bottoming out, as the Handelsblatt survey Dax sentiment among more than 7,000 private investors shows. According to Stephan Heibel, who evaluates the survey weekly, this does not necessarily have to be sustainable.
For a bottom formation from which prices rise again, speaks above all of the current mood of panic, which suggests that many sales have already been made, coupled with increasing optimism about the future and a relatively high willingness to invest.
In Germany in particular, the leading index Dax no longer has much downward potential. In the current year, the benchmark has already fallen more than 20 percent, while the US Dow Jones index has only lost 13 percent. The lack of dependence on Russian natural gas in the USA was the reason for this performance difference between the German and the American stock market index.
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But the development on the gas market has changed, even if the price jumped up again significantly on Monday. Because for a few days, the federal government has considered the gas storage tanks to be full enough to get through the winter. Gas will no longer be bought “at any price”.
Since then, the futures contract TTF on the energy exchange in Amsterdam, which is trend-setting for European gas trading, has fallen significantly – from a peak of $340 to $214 last Friday. Heibel does not consider the recent price increase to 284 dollars to be sustainable. Because the temporary suspension of Gazprom deliveries did not come as a big surprise to the expert.
“There is much to suggest that the provisional highs will not be reached again because many speculators have recently been active on the gas market,” says Heibel. He thinks it is possible for speculative positions to be liquidated in the coming week, which in turn will lead to a sharp correction on the gas market. This development should in turn have a positive impact on economic sentiment.
A look at the cash ratio, which is determined using the AnimusX survey, is also encouraging. Both private investors and professional investors are interviewed here. Institutional investors in particular liquidated positions last week and increased their cash holdings. So there is ample cash and an intention to buy stocks at current levels.
In the US there is also sufficient liquidity and enough pessimism to form a bottom. Because if investors are pessimistic, the majority of them have not invested. Then only a few can sell and thus depress the courses.
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However, the mood there is not quite as constructive for new price gains as in Germany. And since the German stock market usually follows the US market, the risk of further price losses also remains for the Dax.
Constructive starting position also for gold and oil
The current mood among gold investors is extremely bad, but there is great optimism about the future. Because with a gold price close to the support level At $1,680 a troy ounce (31.1 grams) for the past two years, gold investors are confident that the price will rise again soon and are waiting for an opportunity to enter. “Very constructive, that’s what a bottom looks like,” says the sentiment expert.
The situation in the oil market is very similar. There, too, panic reigns, while investors are convinced of rising oil prices in the future.
In Heibel’s opinion, both markets are suitable for low-risk speculation. “This is exactly what bottom formation often looks like,” explains the AnimusX Managing Director.
Current survey data
Investor sentiment has fallen from minus 4.1 in the previous week to minus 6.5 and has thus again reached extreme values that are necessary for a bottoming out.
Investor complacency has also slipped from minus 3.7 to minus 5.8 and shows the strong uncertainty. In the coming weeks of September it will be decided whether the July low of 12,400 points in the Dax will hold up or whether the index will continue to slide. Opinions differ widely at the moment.
But there is hope: the future expectation is slightly positive at plus 1.0, a rarity in 2022. And the willingness to invest also shows with a value of 1.4 that investors find the current price level attractive.
The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, is neutral again. In the portfolios, the number of call leverage products, which are used to speculate on rising prices, is identical to that of put derivatives, which investors use to hedge against falling prices. This ends the strong hedging bias of the previous weeks, when the number of puts dominated. Private investors still hedged towards the end of the summer rally and are now liquidating their hedges again as the sell-off resumes.
Institutional investors who hedge themselves via the Frankfurt derivatives exchange Eurex are currently behaving neutrally. The put/call ratio at Eurex stands at 1.4, which corresponds to the average for the past few months.
It is very different in the USA. There the put/call ratio of the Chicago futures exchange CBOE stands at 0.78 and shows a strong hedging tendency on the part of US investors. US fund investors are similarly defensive and have reduced their investment quota to 33 percent. Although such a low ratio is not uncommon in 2022, historically fund managers are usually invested with 60 to 80 percent.
US retail investors have a bull/bear ratio of minus 28 percent. More than half of US private investors are pessimistic, only 22 percent are optimistic.
The “fear and greed indicator” of the US markets, calculated using technical market data, is at 44 percent and only shows a slight fear. “There’s probably still room for improvement,” says Heibel. A contrary statement emanates from shorter-term technical indicators. They signal an extremely oversold situation in the market. At least in the short term, the sellers are likely to have exhausted themselves, a recovery is due.
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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