FRANKFURT (DEUTSCHE-BOERSE AG) – Many professional bears have given up and are now sitting on the long side. It’s different with the private ones, who are more likely to be out. The bottom line is that this takes power out of the market.
January 10, 2024. So far, the big setback that so many stock market investors had bet on at the beginning of the year has not happened. After all, there has been a small downward correction of almost 1.8 percent since our last sentiment survey, which the DAX has almost made up for as of today’s survey date. In the end, a minus of 0.3 percent remains on the reporting date.
In many places there may well have been good arguments to bet on a proper technical correction in January, especially given the impressive DAX performance in the last two months of last year. Not only because historical statistics may support such a development, but because, among other things, many assume that the US Federal Reserve is not in as much of a hurry to cut interest rates as the bond markets there have recently priced in. Opinions between central bank representatives and the market regarding the expected number of interest rate cuts also differ significantly. In short: According to popular opinion, overheated bond and stock markets should cool down significantly. Or? If you listened more closely, with every day that the hoped-for stock market correction failed to materialize, you could also hear new arguments for further falling bond yields in the USA and the associated record-breaking rise in stock prices.
At least with winnings behind you
Now the mood among the institutional investors we surveyed with a medium-term trading horizon has improved significantly again compared to the first survey of the new year, which was extremely negative. Because our Börse Frankfurt Sentiment Index rose by 24 points to a new level of -11. As we suspected, the majority of investors were probably not betting on a trend reversal in the DAX, but were simply looking for a quick profit from setbacks in the first days of January. This is supported by the fact that 12 percent of all those surveyed went directly from the bear side to the bull side, meaning they turned their commitments around 180° with a presumably decent profit.
Sentiment among private investors went in the opposite direction. Because the Börse Frankfurt Sentiment Index in this panel fell by 11 points compared to the previous week to a new level of -7. The bull camp has reduced by 10 percentage points, with almost all former optimists joining the neutral players on the sidelines. This is notable because since our last survey there has been little opportunity to sell shares at a significantly higher level than the index level at that time.
Risk-averse private investors
With today’s survey, the strong gap in sentiment between private investors and institutional market participants has shrunk significantly again. Especially in the latter case, there is not much left of the strong pessimism of the previous week. It is also questionable whether the remaining short positions of domestic investors are large enough to provide sufficient supportive demand in the event of renewed DAX weakness at a lower level. Let alone trigger a significant squeeze if prices continue to rise at the top.
Even if the bottom line is that the DAX looks a bit battered with today’s survey, it is probably less the domestic positioning that will cause volatility in the next few days. Rather, the stock market barometer relies on long-term capital inflows (mainly from abroad) in order to gain further upward momentum.
Sentiment index of institutional investors
DAX (change from previous survey): 16,700 (-50 from previous week)
Börse Frankfurt Sentiment Index institutional investors: -11 points (+24 compared to the previous week)
Sentiment index of private investors
DAX (change from previous survey): 16,700 (-50 from previous week)
Börse Frankfurt Sentiment Index for private investors: -7 points (-11 points on the previous week)
January 10, 2024, © Goldberg & Goldberg for boerse-frankfurt.de
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