From GS Sales/Trading

Sources: Derived from internal high-frequency data sources (PB, Strats, Derivs/EPFR data, Pasquariello, Flood, EPFR, Kostin, Buybacks desk, Leyzerovich, etc.). Feel free to reach out for further details.

Key Takeaways:

- Market Dynamics: A mix of factors contributed to the mid-week reversal in US equities: a more hawkish-than-expected Fed rate cut, the ongoing data vacuum caused by the government shutdown, earnings beats that failed to drive significant market reactions, and a rally driven by narrowing breadth.

- Investor Behavior: Professional investors responded cautiously:

  - Long-Only (LO) funds and Hedge Funds (HFs) were net sellers, with outflows of -$3.5 billion and -$1.6 billion, respectively.

  - Prime Brokerage (PB) stats indicate Hedge Funds were net buyers of global equities during the week but notably excluded US equities.

- Non-Economic Factors: The supply/demand balance continues to favor buying:

  - CTA flows have slowed to minimal levels (positive or negative).

  - Corporates significantly ramped up buyback activity since the quarter's start.

  - Retail investors remain supportive, with consistent inflows into equity mutual funds and active trading in favored themes like Nuclear (+6.45% for the week) and Quantum Computing (+4.49%).

Upcoming Focus Points: Attention will be on numerous Fed speakers this week, Tesla's shareholder meeting (Thursday), and a test of historical seasonality trends, which have seen some misses this year.

Hedge Funds – Prime Brokerage Highlights:

- Global Metrics: 

  - Gross leverage increased by +1.0 points to 286.1% (70th percentile, 1-year).

  - Net leverage rose by +0.8 points to 79.3% (87th percentile, 1-year).

  - L/S ratio improved slightly by +0.4% to 1.767 (74th percentile, 1-year).

  - Fundamental L/S gross leverage declined by -3.9 points to 207.2% (87th percentile, 1-year), while net leverage increased by +1.2 points to 55.9% (66th percentile, 1-year).

- Global Equity Activity:

  - Net buying occurred for the second consecutive week (4 of the last 5 weeks, +0.3 SDs, 1-year).

  - Gross trading activity saw the largest increase in four months, driven by long buys outpacing short sales (1.2:1 ratio).

  - Every major region, excluding North America, experienced net buying, with Asia (DM + EM) leading the gains.

- Sector Trends:

  - Single stocks were net bought for the second consecutive week (7 of the last 8 weeks), led by long buys.

  - Macro products were net sold, primarily from short sales.

  - 10 out of 11 global sectors were net bought, with Industrials, Information Technology, Energy, Financials, and Healthcare leading. Real Estate was the only sector that was net sold. 


SYSTEMATIC: As of our latest update on Friday before the US market opened, our models indicated that CTAs had sold $1.5 billion in Global Equities over the week, slightly reducing their overall exposure to $173 billion (95th percentile over the past year). Looking ahead, our models project that CTAs will remain modest sellers across all market scenarios over a one-week horizon. Key level to monitor: 6672 serves as the short-term threshold for the S&P E-mini.

Summary:

1. CTA Corner: We have seen CTAs as small sellers in every scenario over the next week following the sale of $1.2 billion in global equities last week. Positioning remains strong, in the 94th percentile.

CTA Flows:

Over the next 1 week…

Flat tape: Sellers $3.6B ($1.48B out of the US)

Up tape: Sellers $2.25B ($2.26B out of the US)

Down tape: Sellers $31.55B ($7.84B out of the US)

Over the next 1 month…

Flat tape: Sellers $9.67B ($4.18B out of the US)

Up tape: Buyers $12.99B ($1.32B into the US)

Down tape: Sellers $205.3B ($67.2B out of the US)

Key pivot levels for SPX:

Short term: 6679

Med term: 6386

Long term: 5916