Traders Predicted to Sell Stocks as Markets Face Uncertainty
Traders to Unload Stocks Based on Momentum Patterns
Goldman Sachs Group Inc. predicts that traders will be compelled to sell stocks over the next week, irrespective of market movements. Cullen Morgan, an equity derivatives and flows specialist at the bank, anticipates that commodity trading advisers (CTAs) – who ride the wave of asset price momentum through long and short bets in the futures market – will need to offload holdings worth $129 billion after accumulating substantial long positions.
CTAs Expected to Sell Amidst Rising Market
CTAs, commonly known as the trend-following cohort, are projected to sell $10 billion in a rising market and potentially up to $42 billion if stocks decline in the coming week. However, when considering the long-term outlook of one month, the same CTAs are anticipated to buy $42 billion in a rising market, but may sell as much as $226 billion if markets take a downward turn again.
Global Stocks Surge, Fueled by Tech Giants
Global stocks have been witnessing a steady rise, with the S&P 500 Index reaching record highs, fueled primarily by large-cap technology stocks like Nvidia Corp. and Microsoft Corp.
Nasdaq 100 Futures Positioning Reaches Three-Year High
Nasdaq 100 futures positioning is currently at its highest level in three years. Investors appear to favor growth stocks as they approach the earnings season, as highlighted by a note from Citigroup Inc. led by Chris Montagu. Positioning has reached significantly extended long and one-sided levels, increasing by an additional $3.4 billion last week to about $25 billion.
Concerns Over Profit Levels in Nasdaq
The growing concern lies in the profit levels, particularly for Nasdaq, where positioning and profits have become significantly extended. The average long position is nearing a 5% profit, which amplifies the risk of profit-taking unwinds and potentially creates challenges for sustained market rallies in the near future, according to Chris Montagu of Citigroup.
Analyst comment
Positive: Global stocks surge and Nasdaq 100 futures positioning reaches a three-year high, indicating investor confidence and favorability towards growth stocks.
Negative: Traders are expected to sell stocks due to uncertainty and profit-taking concerns. CTAs are projected to offload holdings worth billions of dollars, potentially impacting market stability.
Neutral: The article provides information about market trends and predictions from Goldman Sachs and Citigroup. It does not provide a clear indication of the overall market outcome.
