German blue chips are rising and rising, and some local medium-term investors are switching to the short side, not without having taken profits. Others are active, as Goldberg suspects.
German equities, as measured by the DAX, have continued to rise for the seventh week in a row. This time, the reaction of many medium-term investors is clear: take profits and switch to the short side. This is how Joachim Goldberg interprets the fact that 13 percent of professionals and 11 percent of private investors have sold shares and 12 percent and 5 percent respectively have gone short. The sentiment indices now stand at -22 and +2 points.
In relative terms, the behavioral economist sees market sentiment, at least among professionals, as clearly pessimistic. He expects a re-entry on the downside from 16,300 and 16,350 points. According to Goldberg's assumption, the price increases are based on long-term international sources. And with the end of the year approaching, the risk of a short squeeze is significantly higher.
13 December 2023. FRANKFURT (Goldberg & Goldberg). The DAX's upward trend shows no signs of fatigue in the seventh consecutive sentiment survey. The latest weekly gain of around 1.7 percent is impressive. In fact, the meeting of the US Federal Open Market Committee ending tonight (CET) and the meeting of the European Central Bank scheduled for tomorrow, as so-called event risks, have not even caused a significant correction in the trend up to the time of today's survey. Even if, unlike some players, the central banks are likely to be much more cautious when it comes to rate cut fantasies for the coming year, the fear of a possible hawkish surprise does not seem to be reflected in the recent price performance of the major indices on the other side of the Atlantic and in this country. In other words, there seems to be no doubt in many quarters that interest rate cuts, particularly by the US Federal Reserve, are already priced in for 2024. Just as there is no doubt that inflation will flare up again.
Profit-taking plus caution
Meanwhile, the institutional investors we surveyed with a medium-term trading horizon appear to have continued to use the higher share prices to take profits. This is because our Börse Frankfurt Sentiment Index has lost a substantial number of optimists for the fifth time in a row: the index fell particularly sharply by 25 points in today's survey and is now at a level of -22, i.e. clearly in pessimistic territory. 13percent of all investors surveyed have contributed to the lowest sentiment index since September 13, as they have not only been content to take profits, but have almost completely turned their previously bullish investments into bearish positions.
We can observe a similar trend among private investors, as the Börse Frankfurt Sentiment Index has also fallen significantly in this panel by 16 points to a new level of +2. However, the exodus from the bull camp is not as pronounced as among the institutional counterparts. Only slightly less than half of the former optimists have ventured directly to the bear side. The majority, on the other hand, have contented themselves with profit-taking and are now among the neutral investors.
We are talking about pessimism
All bulls who have left since our last sentiment survey naturally have two weighty arguments on their side. Firstly, accumulated gains that "simply had to be realized" (possibly even close to the all-time high). Secondly, the need for caution, because the US Federal Reserve in particular - and this could be confirmed by the Federal Open Market Committee's macroeconomic projections, which are also due to be published this evening - may not be in as much of a hurry to cut interest rates next year as some are already hoping.
As far as institutional investors in particular are concerned, sentiment is now at one of the lowest levels this year, and even at a three-month low in relative terms. However, many of the bulls who have since gone rogue are likely to use a setback in the DAX to re-enter the market (possibly between 16,300 and 16,350 points) instead of betting on a longer-term trend reversal, thus providing the stock market barometer with important support.
On the other hand, it is remarkable that the DAX has shown no signs of fatigue recently despite the unwinding of many bullish exposures over the past few weeks. This is probably due to further long-term capital inflows. At the same time, the risk of a short squeeze in the event of further price rises has increased significantly, not least in view of the approaching year-end.
13 December 2023, © Goldberg & Goldberg für boerse-frankfurt.de
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Bullish | Bearish | Neutral | |
Total | 25% | 47% | 28% |
To previous week | -13% | +12% | +1% |
DAX (change to previous week): 16.830 (+280 to previous week)
Börse Frankfurt Sentiment Index of institutional investors: -22 points (-25 to previous week)
Bullish | Bearish | Neutral | |
Total | 40% | 38% | 22% |
To previous week | -11% | +5% | +6% |
DAX (change to previous week): 16.830 (+280 to previous week)
Börse Frankfurt Sentiment Index private investors: +2points (-26 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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