Possible support purchases are now missing on the stock market

Bull and bear in front of the Frankfurt Stock Exchange

A market phase characterized by great uncertainty.

(Photo: dpa)

Dusseldorf There may be further turbulence on the stock market in the short term. From a perspective of a few months, stock purchases are more likely to be worthwhile.

This can be derived from the data of the Handelsblatt survey Dax-Sentiment. After evaluating the survey, sentiment expert Stephan Heibel expects the stock markets to be significantly higher in the next three to six months. “It’s been like that at least twice in the past when we’ve had such negative sentiment readings,” he explains.

Sentiment on shares has slipped to minus 5.8 and is therefore in the area of ​​extreme pessimism. This continues the historically bad mood. This value is negative for 18 weeks in a row. This has never happened since the Handelsblatt survey began in September 2014. Even in the 16-year history of the more extensive survey by the analysis company AnimusX with Heibel as the owner, there has never been such a long phase of a depressive mood.

But why can there be turbulence in the short term? On the one hand, this is related to the increased investment rate. Many investors have used the low prices of the past week to buy shares and will therefore be absent in the coming weeks.

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A comparison of investor sentiment shows why this could become a problem. There is currently a similar level of pessimism as at the beginning of March, when the Dax slipped to around 12,500 points, ten percent lower than the leading German index during the Handelsblatt survey on Friday and at the weekend. “It makes me think,” says the AnimusX CEO.

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Because a constructive development would produce an opposite development. The scenario would be: The Dax slips back to 12,500 points and investor sentiment collapses. However, not as strong as the first time. Sentiment experts call this a habituation effect, a positive development.

But currently the opposite is the case. Even a slight descent to 13,600 points led to a panic mood that can keep up with the panic of early March. At the same time, many investors have bought shares, the investment rate has skyrocketed, and cash for further purchases is becoming scarce.

“Now no more negative surprises can happen, because there will be hardly any support purchases,” explains Heibel. Investors are hoping that there will be no further escalation of the trouble spots: war in Ukraine, inflationary pressure and corona lockdown in China.

In the absence of negative news, the technicals on the markets are such that prices should recover simply because the selling pressure is easing. But new selling pressure would now be countered by hardly any purchasing power.

Current survey data

The fact that investor sentiment slipped to minus 5.8 was due to the US Federal Reserve. At first, investors were relieved when US Federal Reserve Chairman Jerome Powell said that a 75 basis point rate hike was out of the question. But shortly thereafter, the same statement caused a sell-off in the stock markets as fears arose over whether the central bank would be able to contain inflation at all.

Uncertainty is also spreading, the value has collapsed to minus 8.1. The last time there was such great uncertainty was at the beginning of the war in Ukraine. For Heibel it is “amazing that interest rate developments can have a similar impact on investors’ minds as a war”.

The future expectation remains negative with a value of minus 0.6, bears have dominated the floor for six weeks now. But the current price level on the stock markets is obviously already being viewed as an entry opportunity. The willingness to invest has increased slightly to plus 2.0.

The Euwax sentiment of the Stuttgart Stock Exchange, where private investors trade, has fallen to minus six. Investors obviously do not see any opportunities here, but continue to protect themselves against a continuation of the sell-off. Negative values ​​indicate an excess of put versus call products on the Dax in the portfolios of private investors and vice versa. Institutional investors who hedge themselves via the Frankfurt futures exchange Eurex are now positioned neutrally.

The put/call ratio of the Chicago futures exchange CBOE jumped last week. In the US, investors have obviously asked for clear hedging products such as put options that rise when prices fall. US fund managers seem to have sensed the current sell-off correctly. Their previously low investment rate of just 46 percent rose to 57 percent last week.

The bull/bear ratio for US retail investors is down 26 percent, indicating a clear overhang of the bears who expect falling prices. A proportion of 53 percent bears versus only 27 percent bulls. However, the ratio has reversed somewhat from the previous week, with some former bears joining the bulls.

The “fear and greed indicator” of the US markets, calculated using technical market data, shows moderate fear with a value of 31 percent. Extreme anxiety prevails from 25 percent. Short-term technical indicators are showing an oversold market. This means: The indices have fallen too low too quickly, and a countermovement should come soon.

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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