28/04/21 13:55:21

Market sentiment: "Extra yield desperately sought"

In the sideways trend, quite a few bears give up and adapt to the buy-and-hold investors. This does not have to be a bad sign.

In a persistent sideways market, professional bears in particular are giving up. 6 percent have disposed of their short positions in DAX shares, while 4 percent have gone long. This lifts the sentiment index of this investor group to (still quite pessimistic) -15 points. Joachim Goldberg suspects that the switchers have given up the belief in a major correction. Currently, the professionals would have to be very active if they wanted to beat the market. The gains turned out to be very small.

The situation is different for private investors, who would not have this constraint. Of these, 3 percent have moved from long positions and 8 percent from short positions to the sidelines. The proportion with no exposure is 32 percent, the highest since 2014. The bottom line is that the behavioral economist continues to think the market situation is favorable from an optimist perspective. More demand from the pessimists is to be expected between 14,950 and 14,990. For an upward thrust, fresh demand is needed, which could bring the bears into buying pressure.

28 April 2021. FRANKFURT (Börse Frankfurt). What looked like the beginning of a significant correction on the stock markets on both sides of the Atlantic last week turned out to be another disappointment for the pessimists by the weekend. Of course, there was good reason to hope for a setback in share prices, especially in the U.S., given the recently announced tax plans of the Biden administration, which contain all kinds of "cruelties". Especially for those with a taxable income of more than USD 1 million per year. However, the half-life of the announcement of a planned doubling of the capital gains tax was comparatively short. This is because it quickly became clear to stock market participants that this tax would probably not affect even half a percent of U.S. taxpayers. At the latest with the publication of further extremely positively surprising economic data, there were even marginally higher all-time highs for the broad-based S&P 500 index, for example. Here in Germany, the DAX was able to recover 1.7 percent from the correction low of last Wednesday (15,072) at the peak, but remained on balance with a plus of 0.6 percent (point view) compared to the previous week in consolidation territory.

DAX correction shelved

At least the recent comparatively strong pessimism among the institutional investors with a medium-term trading horizon surveyed by us has receded somewhat. According to today's survey, the Börse Frankfurt Sentiment Index has risen by 10 points and now stands at -15. This means that at least two thirds of the significant decline in the index from the previous week has been made up. At the same time, the bear camp has been significantly reduced, with the majority in favor of the optimists. Obviously, the part of the former pessimists, who were able to get rid of their short positions or hedges without significant losses, has come to terms with the fact that there will probably not be a major setback in the DAX.

Among private investors, sentiment also improved compared with the previous week, albeit not to the same extent as among institutional investors. This is because the Börse Frankfurt Sentiment Index rose by only 5 points in this panel to a new level of -8. In contrast to its institutional counterparts, however, there was not only a reduction in the bear camp, but also some optimists parted with their commitments. At the same time, the group of neutral players increased significantly and, with a share of 32 percent of all respondents (an increase of 11 percentage points compared with the previous week!), reached its highest level since the end of June 2014.

Being better than "buy and hold

The analysis of today's survey shows once again that those players who are looking for falling prices currently have to be very active in order to get out of their bearish exposures even a little bit profitably. This is especially true for institutional investors, who may be trying to use DAX setbacks to generate a higher return than could be achieved with a pure buy-and-hold strategy. In other words, they are trying to beat the market. A problem that private investors do not normally have.

On balance, the situation remains favorable for the DAX, as further demand from the pessimists could possibly provide support for the stock market barometer as early as between 14,950 and 14,990 points. However, to free the DAX from its lethargy, fresh long-term demand is needed, also from abroad. Only in the event of a significant upward impulse would the remaining pessimists of today probably be forced to uncover their commitments - then in the context of a squeeze.

28 April 2021, © Goldberg & Goldberg for boerse-frankfurt.de

Sentiment index institutional investors

 BullishBearishNeutral
total28%43%29%
compared to last survey+4%-6%

+2%

DAX (change from previous survey): 15.290 (+100 Pts.)
Börse Frankfurt Sentiment Index institutional investors: -15 points (status of previous survey: -25 points)

Sentiment index private investors

 BullishBearishNeutral
total30%38%32%
compared to last survey

-3%

-8%+11%

DAX (change from previous survey): 15.290 (+100 Pts.)
Börse Frankfurt Sentiment Index private investors: -8 points (status of previous survey: -13 points)

About the Börse Frankfurt Sentiment Index

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.

Your opinion counts: Market expectations from investors

All interested investors are invited to participate. It only takes 15 seconds. You will receive an email with a survey link every Tuesday. The results of the analysis will be sent to you by e-mail.

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