FRANKFURT (DEUTSCHE-BOERSE AG) - The rise in the DAX without pause for breath over the course of the week has put the bears in a tight spot. For Joachim Goldberg, it is a favorable starting point for further records.

December 5, 2024 FRANKFURT (Goldberg & Goldberg). A sentiment week of DAX superlatives lies behind us. Three new all-time highs and breaking the 20,000 mark for the first time alone. And we are talking about a price increase of 4.9% since last Wednesday, without any major setbacks. For all those, including many private investors, who have held on to their long positions over the past few months, this is probably a celebration.

In contrast, institutional investors had less reason to rejoice. The sharp rise in the bear barometer of more than 1,000 points at times (calculated from the weekly low) since our last sentiment survey must have been particularly painful for the bears who only joined the market in the previous week. And some may have asked themselves whether such a rise in the DAX is justified in view of the not exactly encouraging macroeconomic situation in Germany.

Skepticism here?

The institutional investors we surveyed with a medium-term trading horizon were certainly not responsible for the strong rise in the DAX. Our Borse Frankfurt Sentiment Index fell by 14 points compared to the previous week to a new level of zero. After new bearish investors had already appeared on the scene in the previous week, their group has now increased by a further 10 percentage points. On the one hand, these are former bulls who have presumably turned their position 180 degrees (40% of those willing to switch) to "short" near the previous record levels of October. On the other hand, previously neutral investors who were neither comfortable with the significant price increase nor prepared to bet on a continuation of the December rally.

Private investors still seem to be betting on this rally, both those we surveyed via social media and other investors. The Borse Frankfurt Sentiment Index in this panel has fallen by just one point to a new level of +18, with the polarization between bulls and bears (slightly stronger for the latter) having increased somewhat compared to the previous week. The urge to take profits has therefore remained manageable.

? belief in upward trend there

While private investors are apparently betting on a continuation of the upward trend, their institutional counterparts remain skeptical. This is why the sentiment gap between the two panels has widened. The bottom line is that hardly any institutional investors on the bear side were prepared to pull the emergency brake. Possibly also because there have only been slightly better entry opportunities for bulls since our last survey.

Even though our Borse Frankfurt Sentiment Index is now at the neutral zero line, the latest development shows that the group of bears has risen by 18 percentage points over the past two weeks. Slightly more than half of them have become active in a rising market without any significant setback in the Borse barometer since then - an indication of long-term capital inflows. At the same time, many of these new short positions are probably already under water. And preferably these exposures will be waiting to be covered back at lower levels (probably in the 19,690/750 range). On the other hand, if the DAX continues to rise to new record highs, it should be difficult for the bears to justify their position to third parties. However, the mere fact that there is an equally high proportion of bulls on the other side, who might realize profits if the DAX continues to rise, should stand in the way of a veritable short squeeze in the bear camp. But the signs for the bear barometer are certainly positive.

By Joachim Goldberg

December 5, 2024, © Goldberg & Goldberg for boerse-frankfurt.de

(Deutsche Borse AG is solely responsible for the content of this column. The articles are not an invitation to buy or sell securities or other assets).