The strong move lower has encouraged buying by local investors, which Goldberg believes is a drag on the market.
Since last Wednesday, German equities have broken through what Joachim Goldberg calls a thin floor and have lost significantly. This is driving professional investors into equities, as the survey shows. 14 percent of the professionals have bought. The behavioural economist suspects that the new bulls got in well below 15,500 points. The sentiment index of this group rises to +7 points without the help of the unchanged short side. The situation is different for the private investors, 4 per cent of whom have gone short. Their sentiment index is now slightly lower at +11 points.
Goldberg concludes that the majority of investors we surveyed expect a healthy correction. However, recent bulls are now a drag on the DAX. On the upside by selling the optimists underwater when their average entry prices reach around 15,650/700 points. And on the downside from around 14,850 if the bullish positions prove too costly.
27 September 2023. FRANKFURT (Goldberg & Goldberg). All of a sudden, the months-long sideways movement of the DAX was over. Since the meeting of the Federal Open Market Committee of the US Federal Reserve last Wednesday, the DAX has also weakened considerably and was even driven down from its original "comfort zone" at the beginning of the week. Of course they were there then, the negative arguments. Be it the new (interest rate) forecasts by the members of the Fed's Open Market Committee and the associated sharp rise in bond yields in the USA since then, but also here in Germany. Or the budget freeze, the so-called "shutdown", which has been viewed with increasing concern in the USA for a few days now and which threatens if Congress does not succeed in settling its budget dispute by midnight on 30 September. Of course, once again there was a look at China and the real estate crisis that is brewing there, or also at seasonal statistics, according to which September is the weakest month on the stock market. In any case, at the end we note the largest trading range of a sentiment week for the DAX this year with 3.8 percent.
Undeterred bullish
Meanwhile, the sentiment of institutional investors with a medium-term trading horizon surveyed by us has improved for the third time in a row, so that our Börse Frankfurt Sentiment Index has risen by a further 14 points to a new level of +7 and is as high as it was last on 22 March. At 14 percentage points, the increase in the bull camp this week stands out in particular. It can be attributed almost entirely to formerly neutral investors. In other words, the bears have not yet covered their commitments despite a decent weekly gain (2.9 per cent on the reporting date).
Among private investors, there was a slight trend in the other direction, as the Börse Frankfurt Sentiment Index fell by 5 points in this panel and is now at a new level of +11. The bottom line is that the bear camp gained 4 percentage points, and here, too, most of this gain (around 75 per cent) is fed by formerly neutral investors.
Strong polarisation of opinions
With today's survey, the sentiment gap between private and institutional investors has narrowed to 4 points. The strong polarisation between bulls and bears is striking in both panels. For example, the share of neutral panel participants among institutional investors is as low as it was last on 6 July 2022, and among private investors it was even lower than it was last in February 2022. At the same time, it can be seen that despite the negative development of the DAX since last week, the voices of bullish investors have hardly decreased; among institutional investors, this group has even increased significantly. In other words: on balance, only a few bullish players have pulled the emergency brake in the form of selling despite the strong weekly loss. On the contrary.
It is quite possible that the new bullish institutional investors did not make their latest purchases into the weakness until well below 15,500 DAX points. Meanwhile, the fact that the share of pessimists has remained stable compared to the previous week shows that despite good gains, people do not want to take them, but prefer to remain risk-averse.
While analysts in many quarters are wondering whether the recent DAX decline may be a healthy correction or even a trend reversal, the majority of investors we surveyed apparently tend towards the first assumption. In the relative view of three and six months, the recent optimism of institutional investors is even more pronounced. Even though these are still not threatening extremes, the recent bulls are a burden for the DAX. Both on the upside in the form of selling if the average cost price (presumably 15,650/700 points) of the skewed optimists of the past three weeks should be reached. As well as on the downside, if the bullish positions should turn out to be too costly (below 14,850?) and these losses have to be realised.
27 September 2023, © Goldberg & Goldberg für boerse-frankfurt.de
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Bullish | Bearish | Neutral | |
Total | 46% | 39% | 15% |
To previous week | +14% | unchg. | -14% |
DAX (change to previous week): 15.275 (-450 to previous week)
Börse Frankfurt Sentiment Index of institutional investors: +7 points (+14 to previous week)
Bullish | Bearish | Neutral | |
Total | 48% | 37% | 15% |
To previous week | -1% | +4% | -3% |
DAX (change to previous week): 15.275 (-450 to previous week)
Börse Frankfurt Sentiment Index private investors: +11 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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