The S&P 500 has declined for five consecutive weeks, breaking through key technical support levels. Goldman Sachs traders have indicated that the data is not encouraging. However, factors such as nearly exhausted systematic selling, month-end pension fund buying, and a record net short position by Commodity Trading Advisors are building momentum for a potential rebound.
In a weekend report, senior Goldman Sachs trader Cullen Morgan described Friday as "one of the most uncomfortable trading sessions in recent memory." The S&P 500's five-week losing streak is a rare occurrence since 1970, with the current downturn's duration even exceeding the selloffs during the 2020 COVID-19 pandemic and the 2025 "Liberation Day" event.
Goldman Sachs' U.S. Stock Volatility Fear Index recently reached 9.2 out of 10, marking 17 consecutive trading days in the "panic zone" (above 8.5). This represents one of the longest continuous fear streaks in the past 15 years.
Concurrently, the index has fallen below all major moving averages and technical support levels, including the sell threshold for CTA strategies. The Nasdaq Index has retreated more than 11% from its historical peak, officially entering correction territory.
**Historically Rare Five-Week Decline**
Cullen Morgan noted that a five-week losing streak for the S&P 500 has been exceedingly rare since 1970, with the last instance occurring during the 2022 recession scare. It is noteworthy that neither the 2020 COVID crash nor the recent "Liberation Day" selloff extended into a fifth week, placing the current decline's duration in a historically uncommon range.
Goldman Sachs conducted forward-looking yield calculations based on these historical cases, concluding that the results are "not encouraging." Morgan stated that while most charts tracked by the firm have not yet shown clear oversold signals, some indicators are beginning to display signs of capitulation.
**Elevated Fear Levels**
Multiple internal Goldman Sachs indicators show market fear at historical extremes:
* **Hedge Funds Continue Net Selling:** According to the firm's prime brokerage weekly report, hedge funds have been net sellers of U.S. stocks for six straight weeks. The recent net selling volume ranks as the third largest in the past decade, primarily driven by long and short position reductions in single stocks, with short positions in macro products also contributing. * **Sharpest Net Leverage Drop in Nearly a Year:** U.S. fundamental long-short net leverage fell by 3.1 percentage points this week, the largest single-week decline since the "Liberation Day" week in early April 2025. * **Fear Index Hits 15-Year Record:** The Goldman Sachs U.S. Stock Volatility Fear Index reached 9.2 out of 10, remaining in the panic zone for 17 consecutive days, one of the longest such streaks in nearly 15 years. * **Sentiment Indicator Nears Historical Buy Signal:** The Goldman Sachs U.S. Stock Composite Sentiment Indicator fell to -0.9 this week, reflecting a significant reduction in overall market equity exposure. Historical data suggests that when the sentiment indicator falls below -1, subsequent stock returns tend to be above average, with the signal becoming more reliable when the indicator drops further below -1.5.
**Short-Selling Pressure Nears Extreme**
From a technical perspective, current short-selling pressure is approaching historical extremes.
* **Gamma Shorts Peak:** Following the expiration of a record over $5 trillion in triple-witching options last week, market maker gamma positions plummeted. As of Friday's close, market makers held a net short gamma position exceeding $7 billion, the second-lowest level on record. This implies the potential for accelerated price moves in either direction. * **CTAs Near Long Reversal Threshold:** Goldman Sachs estimates that systematic strategy investors have sold approximately $85 billion in U.S. stocks over the past 30 trading days, nearing a historical record. The current net short position for CTAs is around $37 billion. The report notes, "There is asymmetry to the upside—we expect CTAs to be buyers under any scenario over the next month," meaning any positive news could trigger a wave of short covering. * **Nasdaq Signal:** Currently, less than 15% of the constituents in the Nasdaq 100 Index are trading above their 50-day moving averages. Historically, this level has frequently preceded short-term rebounds.
A notable structural feature is that despite the intense market volatility, the realized volatility between closing prices remains below 15. However, the one-month implied volatility for the S&P 500 has jumped to 26. The spread between these two is "one of the widest we have ever seen"—this divergence indicates that demand for option protection far exceeds what actual price movements would suggest.
Amid the persistent decline, the report highlights several potential structural catalysts that could alter the market's direction:
* **Month-End Pension Fund Rebalancing:** Goldman Sachs models project that U.S. pension funds will purchase approximately $19 billion in U.S. stocks at month-end, placing this activity in the 89th historical percentile. * **Seasonal Trends:** Since 1950, the S&P 500 has averaged a gain of 1.35% in April, historically a month with strong seasonal patterns. * **Options Market Pricing:** Despite the shortened Easter holiday week, the options market is pricing in an implied weekly volatility of over 3.4% for the S&P 500, one of the highest weekly implied volatilities in the past five years.
Overall, forces for a rebound, such as short-selling pressure nearing extremes, are accumulating. However, a prerequisite for such a rebound would be a de-escalation of tensions in the Middle East. The general outlook for U.S. stocks remains uncertain.
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