The Dax has grown very dynamically since the beginning of October.
(Photo: dpa)
Dusseldorf The year-end rally on the German stock market has brought the Dax one record high after the other these days. This increases the expectations of investors: private investors currently do not want to have a breather. This is shown by the new evaluation of the Handelsblatt survey Dax Sentiment among more than 6000 private investors.
Despite the new highs, the price increase over the past week on the stock exchange is manageable. The Dax had gained “only” just under 0.3 percent on a weekly basis. That doesn’t seem to be enough for investors. Investor sentiment fell 1.5 points to 4.5 points.
In the previous week on the stock exchange, in which the Dax had gained more than two percent, the sentiment had risen significantly. Now “signs of fatigue can be recognized”, sums up Stephan Heibel, who evaluates the survey for the Handelsblatt.
At 4.5 points, however, investor sentiment is still at a level that signals euphoria. The five-week average is also well on its way to reaching a positive extreme level. According to sentiment theory, this development is considered a contra-indicator – which speaks in favor of falling prices.
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But an abrupt end to the stock rally is not likely. Instead, various indicators in the survey suggest a healthy balance.
On the upside, the price potential seems limited. For one thing, many buyers are already invested to a large extent. This raises the follow-up question: Which groups of buyers should then ensure that the rally continues with this dynamic?
On the other hand, there is an increased willingness to sell at the current price level. The survey conducted in parallel by the analysis company AnimusX, owned by Heibel, shows that investors would increasingly reduce positions in the coming weeks if the Dax leveled off at around 16,200 points.
On the other hand, there is little to suggest an imminent correction. This goes hand in hand with the experience of the past weeks and months: market participants used setbacks to re-enter. In the current market environment, they are “just a breather or even an opportunity to buy,” notes Heibel.
On the downside, the German stock market is adequately protected by the behavior of investors. This is supported by the mood among institutional investors recorded by the Frankfurt Stock Exchange and the current put-call ratio. The Euwax sentiment of the Stuttgart Stock Exchange is minus eight – so there are more put products in investors’ portfolios – and indicates a higher degree of protection for book profits.
“In the meantime, there can be short cooling phases at any time. But the fact that there is no alternative to the stock market for many investors will not change for the time being, ”says Heibel.
The new balance on the stock market can also be seen from the fact that there is currently no preferred sector. “Which stocks are currently being bought depends on the daily reports,” observes sentiment expert Heibel.
Sometimes there are cyclical values because public life has normalized. Utility shares are in demand the next day because, for example, Pfizer has presented strong test results for a new type of Covid drug. On other days, tech values drive the overall market.
Current survey data
From a value of 4.0, the sentiment signals euphoria. In sentiment theory, positive extreme values are to be assessed a little more cautiously than negative fluctuations. Warning signals cannot yet be seen directly. “The party mood can last longer than panic,” says Heibel. Investors should keep an eye on developments.
Complacency has also decreased from 4.0 to 3.4 points. Here, too, it can be seen that investors would have liked to have stayed with dynamically rising prices. Surprise is currently a foreign word. More than 80 percent of those questioned see their expectations “fully” or “largely” fulfilled.
The future expectation, on the other hand, continues to show a neutral value at 0.3. This coincides with the explanations above: The short-term price potential is manageable. Investors do not really expect prices to continue rising either. The summary of the cycle phase in three months is correspondingly balanced.
This goes hand in hand with a low willingness to invest (1.5 points). Although the seasonally strong stock market phase has only just begun, there is little willingness to buy among investors. This suggests that most of them have already been invested.
A sideways movement that now occurs would therefore not come as a surprise. But even this does not rule out that the leading index works its way up in very small stages to 16,200 points. He already started doing this last week on the stock exchange.
What a look at the USA reveals
US investors are positioning themselves more aggressively compared to German private investors. According to the put-call ratio of the Chicago futures exchange CBOE, US investors are increasingly speculating with call options that the year-end rally will continue.
In addition, a look at the bull-bear relationship underscores the ongoing optimism. The bull camp is 24 percentage points larger than that of the bears; 48 percent of investors are bullish.
The investment quota of fund investors also remains at a very high level at 104 percent. Investors bought shares on credit, keeping the quota above the 100 percent mark.
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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