Market mood: “Hardly any anticipation for Christmas”

11 December, 2024 FRANKFURT (Goldberg & Goldberg). If we can report another four new all-time highs for the DAX since our last sentiment survey, we are at least fulfilling our duty as chroniclers. After all, these new record highs were accompanied by a temporary price increase of just 1.3%, and at the end of the reporting period only around half of this remained. On the face of it, this feels as if the DAX may have run out of steam.

On the other hand, stock market participants were clearly not influenced by geopolitical news, such as the fall of the Assad regime. On the contrary, one could get the impression that many players have mentally prepared themselves for the pre-Christmas business. Even if the upcoming central bank meetings of the ECB (Thursday) and the Fed (next Wednesday) in combination with expected inflation data from the USA mean that there are still some event risks - albeit probably manageable - ahead for stock market players.

Active winners, shackled losers

Nevertheless, some institutional investors with a medium-term horizon have used the recent rise in the DAX to take profits. This is because our Börse Frankfurt Sentiment Index has fallen for the third time in a row compared to the previous week, namely by 5 points to a new level of -5. The fact that this latest change is comparatively low is due to former optimists, who have almost completely (5% of all respondents) moved to the neutral investors. At the same time, the camp of pessimists has not increased, but has remained unchanged on balance compared to the previous week. In other words, only those who had profits on the clock were active.

However, there was a stronger change among private investors, whose Börse Frankfurt Sentiment Index fell by 10 points to a new level of +8. Incidentally, this is the lowest level of optimism in three months. The bottom line is that there has not only been profit-taking among optimists, whose share has fallen by 7 percentage points. Almost a third of those willing to switch have even gone directly to the short side. Interestingly, we saw little change among the predominantly optimistic investors surveyed via social media. Most of the recent shifts in positions are attributable to the remaining private investors, who we would now even like to attest to a slight pessimism.

Time is running out for the bears

With today's survey, many private investors are therefore not taking any major risks - possibly also because of the upcoming events mentioned above. The reduction of bullish positions due to the book profits accumulated to date is likely to have been the most important argument alongside all other arguments. We see a similar situation on the institutional side, where the profits on some bullish exposures have been realized. 

Naturally, very little has happened on the short side, as the bearish exposures entered into over the past three weeks (just under half of all pessimists as of today) are likely to be predominantly in loss territory. We expect their demand to remain primarily in the range of 19,700/750 DAX points, although the willingness to cover short positions at higher levels is likely to increase as the Christmas holidays approach. On the other hand, the supply situation on the upside has deteriorated compared to the previous week, so that we expect little resistance in the event of a renewed DAX rise. Especially as in this case some of today's pessimists will not stand idly by and may pull the emergency brake. All in all, the signs for the DAX remain positive. 

By Joachim Goldberg

11 December, 2024, © Goldberg & Goldberg for boerse-frankfurt.de

The Börse Frankfurt Sentiment Index moves between -100 (total pessimism) and +100 (total optimism), the transition from positive to negative values marks the neutral line.

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