21/07/21 13:15:00

Market sentiment: "DAX correction welcome in some places"

Despite a good opportunity, only some professionals have cashed in on the stock market, while private investors expect further losses.

Few profit-taking by professional bears and increased anticipation of falling prices among private investors - the reactions to the DAX dip of 4.8 percent in the course have been quite different among the investor groups. Overall, investor sentiment is back at a similar level of -6 and -8 points respectively. What Joachim Goldberg evaluates in the relative view as neutral to positive. 

According to the behavioral economist, the general conditions for price gains have rather deteriorated. Goldberg sees the DAX in a broad-based consolidation with a shaky support through purchases at 14,850 to 14,900 points. Especially if foreign investors should part with German shares, which are heavily invested at the moment.

21 July 2021. FRANKFURT (Börse Frankfurt). God knows one could not speak of quiet vacation markets since our last survey. For the DAX not only marked a new all-time high, but also showed its other side, which must certainly have pleased the majority of the institutional investors we surveyed: We are talking about the biggest setback that the stock market barometer has had to endure since January of this year. It is also possible that the correction, with a temporary drop of 4.8 percent compared with the all-time high, was more severe than some had thought. 

Even though there may not have been a direct fundamental trigger for this setback, there were a number of bearish arguments to choose from. Whether it was the sudden emergence of risk aversion, which manifested itself in increased bond prices on both sides of the Atlantic - in many places there was suddenly talk of the possibly negative impact of the delta virus variant on the further development of the Corona pandemic. Although for more than a year, participants in the stock markets had paid little attention to such fears for long stretches of time.

Comparatively little profit taking

When, at the time of our sentiment survey, a weekly loss of 2.9 percent remained, the question arose in some quarters as to whether the DAX would be rescued by buying into weakness, as it has been so often before, or whether this time everything would turn out differently. After all, some of the institutional investors we surveyed believe that the DAX will recover further than it has so far. Our Börse Frankfurt Sentiment Index has risen by 9 points to a level of 
-6. Not least because, on balance, a group of around 4 percent of all respondents turned their opinion 180° from bearish to bullish. Nevertheless, some of the bears from the previous week remarkably maintained their pessimistic stance and refrained from profit-taking.

Among the previously more optimistic private investors, however, there was a change in sentiment in the other direction. The Frankfurt Stock Exchange Sentiment Index falls with today's survey by 8 points to a level of -4 and is thus exactly at the level of 14 days ago. There were relatively few stop-loss sales - the bulk of the new bears can be traced back to previously neutral investors. 

Will DAX history repeat itself?

With today's sentiment survey, retail and institutional investors are again almost on par in terms of sentiment. Nevertheless, it is remarkable that only slightly more than 60 percent of the institutional bears from the previous week have realized their gains so far. But even if the Frankfurt Stock Exchange Sentiment Index still shows a pessimism of -6, in the relative view of six months one must rather speak of a neutral attitude - related to three months even a slight optimism can be seen among investors. 

The bottom line is that the situation for the DAX has tended to deteriorate with today's survey. This is because the buybacks by institutional investors have not yet led to a resounding recovery. There is much to suggest that the stock market barometer will continue its broad-based consolidation, with the bottom at around 14850 to 14,900 points likely to be the more vulnerable. Especially if there should still be outflows of foreign capital flows, which are still likely to be very heavily overweighted in eurozone equities. In any case, domestic investors alone will have difficulty driving the DAX even higher than the previous all-time high of around 15,810. 

21 July 2021, © Goldberg & Goldberg für boerse-frankfurt.de

Sentiment Index of Institutional Investors


compared to last survey



DAX (change from previous survey): 15,290 (-460 pts.)
Frankfurt Stock Exchange Sentiment Index Institutional Investors: -6 points (previous survey: -15 points)

Sentiment index of private investors