For about half a year, the Dax moved almost sideways until this phase ended with a new record high of 16,084 points.
(Photo: dpa)
Dusseldorf After the new record highs on the German stock market, the party mood among investors can hardly be overlooked. According to the current Handelsblatt survey Dax Sentiment, there is even a euphoric mood, which is considered a contra-indicator and rather signals falling prices.
Nevertheless, there is no reason for the sentiment expert Stephan Heibel, who evaluates the weekly survey, to leave this “stock market party” quickly. So investors should stay invested. However, there is one caveat: if you join this party now, you will find it difficult to really celebrate. The risk of new investments is clearly greater. Because most of the party guests have been partying for a long time and have already invested longer.
What speaks in favor of further rising prices despite the euphoria: The state of the market is positive. Both the oil price and bond market rates are falling, encouraging trends for the stock market.
If prices continue to rise, investors could get the feeling that they are not participating sufficiently in the rally. As a result, new money flows into what they consider to be a very lucrative stock market. A stock market proverb describes such a situation very well: “The bull market feeds the bull market”.
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According to the sentiment analysis, the current euphoric mood is a contra-indicator that signals falling prices. But readers of the Dax Sentiment know: This indicator works extremely well in the event of corrections or crashes on the stock market. When the five-week average hits a negative extreme, the end of falling prices is not far away. On the other hand, positive extreme values do not yet signal the end of the rally.
But other indicators also urge caution. The extremely high level of complacency shows that many investors had expected the DAX jump to new record highs. Because they “knew all that”, they tend to be arrogant and often assess the risk differently.
With the new record highs, the goal and thus the end of further price gains has been reached for many investors. The willingness to invest is declining, the expectation that prices will continue to rise are low.
At 50 percent, the investment quota for private investors is above average. According to the survey by the analysis company AnimusX, the average value is between 28 and 45 percent. Accordingly, no high demand is to be expected from private investors.
Current survey data
The fact that there is now euphoria among investors is also related to the course over time. For about half a year, the Dax moved almost sideways until this phase ended with a new record high of 16,084 points. No wonder investors are in a boisterous mood.
Investor sentiment jumped to a value of 5.6 percent, an increase of 2.8 percentage points compared to the previous week. One speaks of a euphoric mood from four percent.
While hardly anyone in Germany talks about investments, it is a popular party topic in the USA: everyone brags about their good investment decisions. And that’s probably changing in Germany at the moment. Because the complacency has jumped to 4.1 percent. Some investors with chests swollen with pride are likely to show off their own trades. The danger of falling prices is often suppressed.
But the danger is real, after all, the future expectation has plummeted from 3.5 percent in the previous week to only 0.3 percent. With the achievement of a new record high, investors see their optimistic expectations confirmed. But they have no further expectations.
And so the willingness to invest has also fallen to 1.6 percent (previous week 3.7 percent). For those who have not yet invested all of their assets, the prices are now too high.
In line with this, the Euwax sentiment of the Stuttgart Stock Exchange shows that private investors are more inclined to hedge. The value of minus seven is not yet extreme, but it is a clear sign of burgeoning profit protection. Negative values signal an overhang of put products over call derivatives in the portfolios of private investors and vice versa.
The put / call ratio on the Chicago futures exchange CBOE shows an excessively bullish attitude on the part of US investors: demand for call options is significantly greater than that of put options used for hedging.
US fund investors have increased their investment ratio to 108 percent. Explanation: Shares in the portfolio can be borrowed, and so you can buy more shares on credit, i.e. own more shares than you actually have in money. That is why such a quota can be over 100 percent.
US private investors have a bull / bear ratio of 15 percent, while the bulls clearly dominate the trading floor. The bull camp is therefore 15 percentage points larger than that of the bears: 41.5 percent expect prices to rise, only 26 percent expect prices to fall.
The “fear and greed indicator” of the US markets, calculated on the basis of technical market data, has jumped to 85 percent and thus warns of extreme greed, which is likely to result in falling prices.
There are two assumptions behind surveys such as the Dax sentiment with more than 6,000 participants: If many investors are optimistic, they have already invested. Then there are only a few 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 prices.
Would you like to take part in the survey? Then you will be automatically informed about the start of the sentiment survey and sign up for the Dax Sentiment newsletter. The survey starts every Friday morning and ends on Sunday noon.
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