Even though the stock market is not exactly showing its volatile side at the moment, some are still profiting from the quiet market.
The DAX is treading water and has produced a range of just 2.2 percent over the past four weeks. Some fear that a violent storm with high volatility and significant price declines could soon break out. The others, meanwhile, are betting that the situation will remain calm for the time being, despite many warnings, and are showing great skill in exploiting the current narrow trading range. Nevertheless, according to Joachim Goldberg, the sentiment situation for the DAX has deteriorated slightly.
10 May 2023. FRANKFURT (Börse Frankfurt). For four weeks now, the DAX has only been moving in a range of around 2.2 percent. A period of calm, a phase of low volatility of the kind normally more familiar from vacation periods and holiday weeks. And with every quiet week that may come along, the fear of a sudden explosion in volatility grows. Because stock market players know that this state of relative calm will not last forever. But there is something else that is worrying institutional investors and short-term traders in particular: in view of the low price fluctuations, lucrative profits can only be generated with relatively high exposures, i.e. with increased risks.
At the same time, the number of warnings and negative comments on the stock market outlook has not diminished. And yes, it is quite remarkable that the meetings of the U.S. Federal Reserve and the ECB last week left hardly any traces on the local stock markets. The lack of agreement on raising the debt ceiling in the US has also remained inconsequential so far. In short, despite all the skeptical analyses, many players are still waiting for the "detonator" for higher volatility and falling share prices.
Agile institutional investors
After all, the institutional investors with a medium-term trading horizon that we survey every week are once again proving that they can move successfully even in the tightest of spaces in terms of price. Even if the price gains realized in the process are likely to be relatively modest. At least our Börse Frankfurt Sentiment Index has risen by 18 points compared to the previous week to a new level of -8. Not least because the group of pessimists has decreased by 8 percentage points. At the same time, almost all the downshifters have moved directly into the bull camp, i.e. turned their commitments by 180°. In addition, the optimists (+10 percentage points) have also benefited from a small group of previously neutral players. The purchases behind this change in sentiment are likely to have been made primarily near the previous week's lows, away from any fundamental considerations.
Among private investors, however, the sentiment picture is different. The Börse Frankfurt Sentiment Index fell by a further 3 points in this panel to a level of -20, which means a new low for the index for the year. The change is mainly due to previously bullish players (3 percent of all respondents) who have joined the neutral players. The bottom line is that sentiment deteriorated again for the third week in a row.
Banking on narrow trading bandwidth
So while there have been only minor changes in sentiment among retail investors recently, the swings among their institutional counterparts are much larger. While they were more negative than retail investors in the previous week, they are slightly more positive in today's survey. If one regards the tendency development with the institutional investors on view of the past three and six months, one cannot speak however of a pessimistic majority. In this relative view, the value of the Börse Frankfurt Sentiment Index of currently -8 is even slightly above the neutral zero line.
For the DAX, the latest development means a slight deterioration in terms of sentiment, especially since the recently active investors probably want to repeat their successful strategy in line with the trading range of the past four weeks. In other words, there is much to suggest that the recent bullish engagements will be turned around again near the high for the year to date just above 16,000 points, and that there is therefore at least a temporary supply of shares there.
10 May 2023, © Goldberg & Goldberg für boerse-frankfurt.de
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Bullish | Bearish | Neutral | |
Total | 33% | 41% | 26% |
To last survey | +10% | -8% | -2% |
DAX: 15.900 (+90 points)
Börse Frankfurt Sentiment index institutional investors: -8 points (+16 points to last week)
Bullish | Bearish | Neutral | |
Total | 28% | 48% | 24% |
To last survey | -3% | unch. | +3% |
DAX: 15.900 (+90 points)
Börse Frankfurt Sentiment index private investors: -20 points (-3 points to last 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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