The neutral camp is reacting to the new record highs with new short positions, which could further fuel the market, as Goldberg analyzes.
Although German blue chips, as measured by the DAX, broke through the 18,000 mark for the first time in today's trading session, the institutional investors we surveyed are stubbornly mistrustful of the price rally. Moreover, 10 percent have now switched from the sidelines to the short side. Market sentiment has fallen to -23 points. Joachim Goldberg points out that hardly anyone is not invested and that the majority is now bearish. Private investors are different, with 4 percent having switched from short to long.
All in all, the behavioral economist assumes that the pessimists, many of whom he sees in the red, were expecting a setback, not a real correction. Goldberg therefore sees them coming back at 17,630/80. On the upside, however, he believes the positions are too small to trigger a short squeeze. From a behavioral finance perspective, the signs are still green.
13 March 2024. FRANKFURT (Goldberg & Goldberg). There were supposedly times when the champagne corks popped every time the DAX reached a new round figure, and yes, a cake was wheeled into the trading floor and cut. Not to mention the photographers who used to wait in front of the trading board to press the shutter button the moment the next 1000 was reached. None of this was to be seen today when the DAX touched the 18,000 mark shortly before the cut-off point of our current sentiment survey. However, this does not necessarily have to be seen as a sign of a lack of interest. After all, in percentage terms, every new 1,000-metre step in the DAX naturally becomes smaller and smaller.
Or was it simply a case of avoiding at all costs the impression that the DAX is in a euphoric phase shortly before the end of its upward trend? Not at all. Because at least the majority of the stock market players we surveyed in our last poll were not bullish. Rather, many players are likely to have become increasingly distrustful of the DAX's almost uninterrupted rise over the past few weeks, although at first glance it does not seem entirely clear where a massive sell-off in equities is actually coming from. Although, for example, inflation in the USA was stronger than expected according to the report published yesterday, dampening expectations that the US Federal Reserve could soon cut interest rates.
Rising skepticism instead of celebration
Today's sentiment survey of institutional investors with a medium-term trading horizon once again focused on the group of neutral investors. In contrast to the previous week, when the bulls benefited, this time 10% of all respondents moved towards the bear camp, although a very small proportion of them were former bulls. This results in a total decline of 16 percentage points in neutral sentiment within two weeks, while the remaining 13% of all respondents are at their lowest level since 29 April 2020. On balance, our Börse Frankfurt Sentiment Index has thus fallen by 12 points to a new level of -23.
Private investors, on the other hand, went in the opposite direction, with previously bearish stock market players throwing in the towel - as many as 4% of all respondents joining the optimists and thus raising the Börse Frankfurt Sentiment Index in this panel by 8 points compared to the previous week to a new level of +5.
Private investors find it easier
Among private investors, the group of neutral investors has also decreased significantly - we have recorded a decline of 40 percent, with those willing to change being split quite unevenly between bulls and bears. The camp of the former increased by 3 percentage points and that of the pessimists by as much as 7 percentage points, resulting in a decline of 4 points for our Börse Frankfurt Sentiment Index in this panel to a new level of -3.
All in all, the sentiment gap between private and institutional investors has narrowed significantly with today's survey. We have noticed a slight pessimism in both groups, whereby the sentiment of private investors is now much stronger than that of institutional investors in a relative analysis of three and six months. The latter are even neutral over the past three months. It can be assumed that the relative bearish majority of investors are still waiting for a major setback. Ideally, the DAX would now probably have to fall to at least 17,450/500 points before demand from these sources could materialize.
On balance, sentiment in Germany is therefore far from optimistic. Even though the situation for the DAX remains favorable, it has deteriorated somewhat compared to the previous week.
13 March 2024, © Goldberg & Goldberg für boerse-frankfurt.de
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Bullish | Bearish | Neutral | |
Total | 32% | 55% | 13% |
To previous week | -1% | +11% | -10% |
DAX (change compared to previous survey): 17,970 (+380 compared to previous week)
Frankfurt Stock Exchange Sentiment Index institutional investors: -23 points (-12 compared to the previous week)
Bullish | Bearish | Neutral | |
Total | 44% | 40% | 15% |
To previous week | +4% | -4% | +0% |
DAX (change to previous week): 17.970 (+380 to previous week)
Börse Frankfurt Sentiment Index private investors: +5 points (+4 to previous week)
The Börse Frankfurt Sentiment Index ranges between -100 (total pessimism) and +100 (total optimism), the transition from positive to negative values marks the neutral line.
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