With Dealers Long $3.5BN Gamma, Market Turmoil Unlikely Before Month-End

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by Tyler Durden
Thursday, Jun 22, 2023 - 02:00 AM

Now that we know that hedge funds have been quietly but persistently derisking for the past 9 days, a move which now appears to be spreading to institutions and high net worth retail, it makes sense why today was the third consecutive day of the market giving back.

As Goldman trader Mike Washington notes in his EOD summary, it was a relatively light volume session with semis + MAGMAN + software + retail favorites all selling off in tandem; the bank's trading desk was "peppered with questions on the move lower but there wasn’t much to point to other than froth coming out of lower quality sleeves of the mkt." The desk also saw an uptick in selling in more speculative complexes like growth software on the way down from not just the hedge fund community but also institutional long-onlies (who had been piling in while HFs were selling) reducing length, as well as a defensive bid for value. As an aside, Powell’s testimony was largely in line with a slightly hawkish tilt, reiterating that we are ‘very far’ from the 2% inflation target and rates will be ‘somewhat’ higher by year end (fed fund futs now pricing in a ~70% probability for a July hike).

This brings us, or rather Goldman, to ask we first said on Monday is the only question that matters: Is the rally about to sizzle or broaden out?