Market sentiment: "Small emergency braking"

8 February 2023. FRANKFURT (Börse Frankfurt). Since our last sentiment survey, stock market players have had a lot of new information to process, and not just in this country. Whether it was the meetings of the U.S. Federal Reserve and the ECB, which were received positively on balance by the players on the stock markets, or the U.S. labor market report published on Friday, which probably surprised many analysts and commentators with its robustness - during the reporting period, the DAX was able to gain around 2.2 percent at times. But even at the time of today's survey, the DAX still shows a weekly plus of around 1.4 percent. Remarkably: Who wanted to enter more favorably compared with our sentiment survey last Wednesday, had to act already extremely clever. Because in the meantime the DAX (before the central bank meetings) had permitted only a setback of scarcely 0.5 per cent. Instead, there was almost consequently a mini-short squeeze.

The institutional investors with a medium-term trading horizon surveyed by us probably also contributed in part to this small buying wave. Our Börse Frankfurt Sentiment Index rose by 14 points to a new level of -11. At the same time, the bull camp gained 9 percentage points - slightly more than half of the migration is made up of former pessimists who threw in the towel in view of the price upswing - we expected their transactions to take place above 15,300 points. The remainder of the increase (just under 45 percent on balance) among the optimists was therefore accounted for by the neutral grouping. However, in absolute terms, the pessimists still make up the majority of stock market investors.

Rapid change in position among particularly active group

A similar development can be observed among private investors, although their Börse Frankfurt Sentiment Index has only increased to a lesser extent. Here, we note an increase of 7 points to a new level of +5. Again, this change is probably due to the same, rather short-term active group of players in the order of 5% of all respondents, who since mid-January (most recently probably less successfully) have been changing their position from week to week - sometimes by 180°, most recently from "short" to "long".

Although on balance we still see pessimism among institutional investors, today's survey is one of the less strong manifestations of the Börse Frankfurt Sentiment Index on the negative side this year. In relative terms, looking at this year's results alone, there has even been a slight optimism recently, and the 3- and 6-month comparisons are now also in neutral territory.

Weakening upward momentum

While the majority of private investors have hardly changed their opinion for weeks, only those pessimists among institutional investors have recently become active who absolutely had to. In fact, it is even questionable whether the remaining pessimists will actually lose their nerve and give up if the DAX continues to rise within a manageable range.

With today's survey, in any case, the DAX should expect less support than before, at least from the side of domestic investors, in fact, the positioning, which is already neutral in the relative view, speaks more for a consolidation phase than for an upward movement with strong momentum. The bottom side is thereby probably supported in the area between 14,890 and 14,940 points by demand from the pessimists, while the top side is not disturbed by massive profit-taking, but stronger impulses (beyond 15,750/15,800) would probably only be possible with the help of capital inflows from long-term investors.

8 February 2023, © Goldberg & Goldberg for boerse-frankfurt.de

DAX (Change from previous survey): 15.400 (+220 points)
Börse Frankfurt Sentiment-Index institutional Investors: -1 points (+14 points to the 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.

• Previous analyses
• Explanation of the method