The downward pressure on the DAX and other stock markets continued in the past week. But even the minutes of the latest meeting of the US central bank, which showed that the members were surprised by the persistently high inflation, and then again surprisingly high inflation figures from the US (consumer price index) could not lead the stock markets to new lows.
The sale ended at 12,000 points in the DAX, and the strongest recovery in recent months followed.
DAX: The mood
The course of the week fits exactly into the mood among investors that we drew a week ago. Those who wanted to sell have had the opportunity to do so on numerous occasions. Therefore, even the negative reports did not lead to a dynamic downward movement. Rather, there were many investors waiting for lower prices to finally kick in.
Since Thursday afternoon’s low of 12,004 points, the DAX has gained 5.5% and ended the week with a weekly gain of 1.3% at 12,438 points.
For the participants in our survey, this violent price fluctuation is initially disconcerting. Investor sentiment rose to -4.0 from -5.0 last week. But there can be no question of relief.
Uncertainty also remains high after -3.7 with a value of -3.2. Apparently, very few people used Thursday’s short sale to make purchases.
The future expectation has increased slightly to -0.3. The bear camp on the DAX still has the upper hand, but the bull camp is noticeably filling up.
There was a big jump in the willingness to invest: after +1.7 it is now +3.1 and shows the greatest willingness to invest since the sell-off in March, when the start of the war pushed prices down.
Euwax sentiment among private investors is in neutral territory with a value of -1. Private investors had positioned themselves long in the summer, closed their positions in August and bought additional protection. There has been little change in this positioning since September, apart from the occasional liquidation of hedging positions.
Institutional investors hedging via Eurex went a bit long, with the put/call ratio at 1.1 below the average level of the past few months.
In the US, investors are a bit more pessimistic, CBOE’s put/call ratio is at a relatively high level, which signals strong put demand.
US fund managers have reduced their investment ratios again. At 20%, this week we are registering the second lowest investment rate in recent months.
US private investors remain extremely pessimistic. The bull/bear rate is -36%. At 56%, bears still make up more than half of all private investors, while bulls are quite rare at 20%.
The S&P 500 Fear & Greed Technical Indicator is trading at 22%, signaling extreme fear in the market.
Interpretation: Dax bottoms?
Is the DAX about to bottom out? The level of pessimism is comparable to the previous week, the current rally has yet to result in a significant improvement in sentiment. But what is striking is the relatively high willingness to invest, which shows us that many investors could not use Thursday’s price drop, which took place in the record time of just one hour, to buy. Many investors are now sitting with their fingers on the trigger and waiting for the next opportunity on the DAX.
This means that further bad news would be bought early again. On the other hand, investors are not positioned for rising prices on the DAX and risk chasing prices if there are no further setbacks.
Prices would then slowly rise until seemingly underinvested investors lost patience and grabbed at any cost, leading to a rally.
Basically, this is a fairly constructive starting point for DAX.
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