"The storm is not over yet"! Goldman Sachs: CTA fully turns bearish, systemic selling pressure may reach the highest in a year in the coming week

Although Trump’s signals of easing Middle East tensions briefly boosted risk sentiment, the latest trading desk warnings from Goldman Sachs and JPMorgan Chase indicate that the market’s deep structural issues remain unresolved. The core contradictions between systemic selling pressure and unliquidated positions are pushing the market toward a new high-volatility zone.

Goldman Sachs’s latest report warns that, due to recent sharp market swings, CTA (Commodity Trading Advisor) strategy funds have been forced to trigger risk control mechanisms. Over the next week to a month, regardless of market movements, CTAs will become net sellers of stocks. Goldman Sachs specifically notes that the expected scale of selling in the coming week could reach record highs in its history, meaning algorithmic trading desks will be a primary source of ongoing market outflows.

Meanwhile, JPMorgan’s position intelligence team analysis indicates that, although recent market turbulence has been intense, there has been no complete “deleveraging” — that is, investors panic-selling at all costs and reducing positions to extreme lows.

The report states that data shows overall investor positions have only fallen back to neutral levels, far from historical clearing points. This structural risk implies that the market lacks sufficient “ammunition” to absorb potential future selling pressure. JPMorgan therefore judges that the recent rebound is more driven by short covering and sentiment recovery rather than the start of a new allocation cycle.

Analysts believe that, as passive systematic traders (like CTAs) become pure selling forces, and active managers’ position adjustments are incomplete, the market remains under pressure for a second bottom after short-term stabilization.

Goldman Sachs: CTAs Are Sellers in All Scenarios

Goldman Sachs’s latest models issue multiple warning signals, indicating that the market is facing triple pressures: systemic selling, hedge mechanism failures, and liquidity drying up.

First, CTA selling pressure hits record levels, with key levels imminent. Goldman Sachs’s conditional CTA flow model shows that, regardless of market rises or falls, systemic funds will continue net selling stocks over the next week to a month. The firm emphasizes that current estimated selling volumes are among the largest on record. If the S&P 500 closes below the medium-term pivot support, it will trigger a new, more intense wave of systemic selling.

Second, market makers are amplifying volatility, with negative Gamma environments increasing price swings. Worryingly, market maker Gamma exposure has fallen to its most negative level this year. This means their hedging behavior not only fails to dampen volatility but can actually amplify price movements — whether markets rise or fall, negative Gamma conditions are expected to persist, significantly increasing the likelihood of entering a high-volatility zone.

Third, liquidity is approaching historic lows, with market confidence near freezing point. Liquidity warnings are also sounding. The depth of E-mini futures order books has fallen to levels seen before the “Lehman Day” crash. Meanwhile, Goldman Sachs’s volatility panic index nears historical extremes, and risk appetite indicators have fallen back to levels seen during the Lehman crisis, reflecting widespread lack of confidence among market participants.

JPMorgan Chase: Positions Not Cleared, Limited Rebound Space

JPMorgan’s position intelligence team echoes Goldman Sachs’s outlook.

On one hand, a technical rebound is possible, but the structural dilemma remains. The team notes that the recent four-week position decline has triggered its tactical position monitoring model’s “attractiveness” signal, suggesting a potential technical rebound in the next two to four weeks. However, this short-term signal cannot hide deeper concerns — current market behavior shows no signs of extreme risk reduction, with overall positions only returning to neutral, consistent with the sideways trend since the Iran situation escalated.

On the other hand, fund flow data reveals fragility. Details show that hedge funds’ buying early this week shifted to selling by Wednesday-Thursday; retail investor flows in individual stocks also turned from net buying on Monday to neutral.

Meanwhile, deleveraging remains limited (below 2 standard deviations), and hedge fund turnover in the US market is normal. Recent ETF hedging demand has not shown sustained increases. JPMorgan concludes that overall “pressure” signals remain limited, and the market lacks the momentum for a full clearance-driven rebound.

It is also worth noting that European markets show clear divergence. JPMorgan data indicates that last week, European hedge fund turnover surged to +2.4 standard deviations (vs. +1.7 in Asia-Pacific and +0.6 in North America). The firm points out that the last time such pronounced regional divergence occurred was after the March 2023 US regional bank crisis and at the start of the Russia-Ukraine conflict in early 2022. Meanwhile, European net selling was strongest (−2 standard deviations), and the V2X volatility index premium over VIX is at a five-year 95th percentile.

Against this backdrop, JPMorgan’s market intelligence team has shifted to a tactical bearish stance, expecting the S&P 500 to fall up to 10% from recent highs, with a target low around 6,270 points. Key risks include: ongoing uncertainty in the Middle East, positions not fully cleared, and systemic selling pressure not yet fully released.

Combining Goldman Sachs and JPMorgan’s assessments, the core contradiction facing the market is the coexistence of geopolitical easing expectations with technical and position-based structural pressures. With CTAs turning fully bearish, Gamma environments remaining negative, and liquidity deeply constrained, any directional price movement could be amplified. Investors should remain highly alert to the high volatility environment in the short term.

Risk Warning and Disclaimer

Market risks are inherent; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should determine whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Investment is at your own risk.