While foreign investors are buying shares, some domestic investors are pulling back. Movement could bring many bears into the loss zone, Joachim Goldberg interprets the results of today's survey.
The DAX has risen again slightly since last Wednesday, albeit with very small fluctuations. Some medium-term investors have withdrawn from both long and short positions. Joachim Goldberg points out that the price gains are coming from abroad. International institutions are once again increasing their demand for European stocks.
He sees local professionals as being heavily underwater with average purchase prices on the short side at 17,630/80 points. From this point, he expects demand from buybacks. However, the behavioral economist also believes that covering with losses is possible. Overall, a good market situation for optimists.
20. March 2024. FRANKFURT (Goldberg & Goldberg). Even though the DAX has reached a new all-time high since our last sentiment survey, it had the quietest sentiment week this year with a trading range of just under 0.8%. Nevertheless, this range was almost completely traded through several times, and despite the narrow range of activity, there was plenty to report on. For example, the latest fund manager survey by Bank of America, which was published yesterday. This not only revealed that the global overweight in equities has increased again. There have also been major shifts in equity allocations away from the USA towards Europe (and even more towards emerging market equities), which should ultimately have benefited the DAX. A net 14% of the fund managers surveyed recently stated that they were now overweight in eurozone equities, having been significantly underweight there in the previous month (-10%).
After all, this is the biggest shift towards eurozone equities since June 2020. Considering that the DAX has risen by over 1,000 points during this period, part of this rally is likely due to these very shifts. At least during this phase, the majority of our domestic institutional investors were never optimistic in our sentiment surveys, meaning that on balance they were swimming against the tide.
Slight tendency towards caution
Meanwhile, the sentiment of the institutional investors we surveyed with a medium-term trading horizon has not changed too much. Our Börse Frankfurt Sentiment Index has fallen again, albeit by only 3 points, and is now at a new level of -26. The fact that there has been a change in the polarization between bulls (-5 percentage points) and bears (-2 percentage points) could be related to the meeting of the Federal Open Market Committee of the US Federal Reserve taking place this evening (CET). Even though there is some controversy as to whether tonight's meeting represents an event risk for the equity markets at all, the group of neutral investors has increased significantly.
We are seeing a slight trend in the opposite direction among private investors. In this panel, the group of neutral investors has also increased - but only by 4 percentage points. This gain is asymmetrically at the expense of the bulls and bears, with the second group losing more supporters. As a result, our Börse Frankfurt Sentiment Index has risen by 3 points to a new level of +7.
Trapped in short positions
With today's survey, the sentiment gap between private and institutional investors has widened again somewhat. Even though the DAX has only strengthened by 0.1% compared to the previous week, this does not change the fact that the pessimistic majority of institutional investors may be becoming increasingly impatient in the absence of a DAX setback. This is because the average purchase price of the underlying short positions, as we assume, is still likely to be around 17,630/80 points, a level at which demand from buybacks could therefore be expected. However, it is quite conceivable that the pessimists would also be prepared to cover their exposures before then, possibly even at a loss.
Even if today's sentiment does not look as pessimistic as the absolute level suggests, especially in relative terms over the next three months, the sentiment situation for the DAX remains favorable, especially if the aforementioned capital inflows continue. However, it remains questionable whether the pessimists' positions will be large enough to trigger a major short squeeze in the event of a further significant rise in the DAX.
20. March 2024, © Goldberg & Goldberg für boerse-frankfurt.de
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Bullish | Bearish | Neutral | |
Total | 27% | 53% | 20% |
To previous week | -5% | -2% | +7% |
DAX (change to previous week): 17.990 (+20 to previous week)
Börse Frankfurt Sentiment Index institutional investors: -26 points (-3 to previous week)
Bullish | Bearish | Neutral | |
Total | 44% | 37% | 19% |
To previous week | +1% | -3% | +4% |
DAX (change to previous week): 17.990 (+20 to previous week)
Börse Frankfurt Sentiment Index private investors: +7 points (+2 points 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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