Market sentiment: "A reference point classic"

5 April 2023. FRANKFURT (Börse Frankfurt). If you look at the comments made by financial market strategists over the past two weeks, it is clear that many of them do not think much of the recent upward movement on the stock markets, to put it mildly. This also applies to the performance of the local DAX, which not only rose by around 3.4 percent in a weekly comparison since our last sentiment survey, but also marked a new high for the year. Even at the time of the survey, there was still a gain of 2.3 percent. In other words: The upward movement of the stock exchange barometer since last Wednesday might not have really suited many investors. Particularly as it was repeatedly reported that the upswing on the stock markets on both sides of the Atlantic was basically unjustifiable. There was also talk here and there of irrational exaggeration or dangerous euphoria. This is understandable - after all, it was not all that long ago that we had to deal with a banking crisis on the financial markets. And the worries about inflation and growth have not abated in the long term either.

Almost only profit-taking

The fact that even the institutional investors with a medium-term trading horizon, whom we survey every week, are increasingly skeptical about the rise of the DAX is shown by the development of our Börse Frankfurt Sentiment Index, which recorded a decline for the second time in a row: this time the index fell by 7 points to a new level of -3. While last week it was the pessimists who recorded a considerable influx, this time it was mainly optimists who were active, among whom skepticism is likely to have become increasingly widespread. Thus, we note a decline of 9 percentage points in this group, optimists who, however, have almost all been content with profit-taking. This is because the camp of neutral-minded players has risen at the same time.

For the former optimists, fundamental considerations or a sustained bearish conviction are likely to have played less of a role than a classic price reference point: The sell-off at the annual high in March. However, the group of neutral players also received a small influx of formerly bearish investors, who probably pulled the emergency brake in view of the DAX rise. The latter account for just under 20 percent of the change in this group.

Little bearish conviction

It is amazing, however, that the bullish majority of private investors almost did not want to take profits at all, even at the high for the year. The stock exchange Frankfurt Sentiment index of this panel goes back by one point to a new level of +10 and moves with it the third week in succession practically on the same level. In the same period, the DAX has gained around 2.8 percent (as of the reporting date).

The bottom line is that the gap in sentiment between private and institutional investors has widened once again with today's survey, although the situation for the DAX has improved compared with the previous week. This is because it can be assumed that the optimists, who have recently realized their gains, are not really speculating on a major slump in the DAX, but are only anticipating a veritable setback for the reopening of their bullish positions. Similar to the pessimists, the majority of whose engagements are currently likely to be under water, a DAX level between 15,200 and 15,250 points would probably come into question for these buybacks, according to our calculations. At the same time, any disruptive supply on the top side for the DAX was thinned out somewhat with today's survey.

5 April 2023, © Goldberg & Goldberg for boerse-frankfurt.de

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

• Previous Analyses
• Explanation of the method