Market sentiment: "The dip buyers were back"

25 August 2021. FRANKFURT (Börse Frankfurt). There must have been quite a few players who, since our last sentiment survey, have been betting on a significant correction on the stock markets on both sides of the Atlantic. Indeed, within the first 24 hours since our survey last Wednesday, there was a setback that peaked at 1.7 percent. However, more had apparently been expected in many quarters. At least if you believed some commentators, you could get the impression at the end of last week that a sell-off must be imminent, especially in the US equity markets. At the very least, this was expressed in negative headlines ranging from the collapse of the U.S.-backed government in Afghanistan to the continued rise in the number of Covid 19 virus cases.
In the end, all that was left of the widely expected selloff was a setback, which even in U.S. stock futures peaked at less than 3 percent. In fact, a phenomenon familiar during the Corona pandemic reappeared and once again ensured that there was only a small correction on the stock market here in Germany as well: dip buyers, i.e. buyers into weakness, once again appeared on the scene and ensured a decent price recovery. 

Quick profits

But also a large part of the medium-term oriented institutional investors we surveyed seem to have used the manageable correction of the DAX for buybacks. Because our Börse Frankfurt Sentiment Index rose significantly by 31 points compared to the previous week to a new level of -7. It is remarkable in this context that almost all pessimists from last week have been satisfied with comparatively manageable gains and have turned their bearish positioning 180° to bullish. It is also possible that most of them assume that Fed Chairman Jerome Powell will not yet announce the tapering of bond purchases at the annual meeting of international central bankers, which begins on Friday. Especially since the meeting originally planned for Jackson Hole will now only take place in virtual form due to the Covid 19 health risks.

Among private investors, our Börse Frankfurt Sentiment Index also recovered, albeit to a lesser extent, by 10 points to a level of now +1. And in the same way, there was also profit-taking from bearish positions in this panel, with two-thirds of those affected moving directly to the bull side.

Back to neutral

With today's survey, the recently large gap between private and institutional investors has clearly closed again. The institutional investors in particular have shown themselves to be extremely agile for the second time in four weeks, so that only a comparatively low pessimistic note can be detected in this panel - in the three- and six-month comparison, one can now even speak of a neutral sentiment scenario again. 
Due to the recent share buybacks, the situation of the DAX has worsened somewhat compared to the previous week in that on the upside in the area between 16,150 and 16,200 points, increased supply from the recent bullish engagements is to be expected. At the same time, some potential demand from domestic sources is now dropping out on the downside due to the buying of the past few days. Nevertheless, there is still sufficient demand, but only below the previous week's low, probably in the range between 15,500 and 15,550 points. 
 

25 August 2021, © Goldberg & Goldberg for boerse-frankfurt.de