Just after the mid-August 200dma resistance rejection, which saw stocks slump (the same day BofA's Michael Hartnett called the market peak to within half a tick), even Goldman's stalwart trading desk bulls such as Matthew Rubner hoisted the white flag and warned that stocks had peaked (for the time being) as supply and demand flows in the market were mismatching and in the opposite direction from July and early August. Or as we said summarizing his August 22 note, "Translation: it's time to step away from the buy button (and if anything, start selling)."
Things got a little bit better last week, when Rubner warned that while the market is likely to suffer air pockets, "things start to improve by the end of next week" (i.e., this coming week). This is how the Goldman flow trader summarized sentiment about a week ago:
The number #1 client question for September: Are we there yet? (to the downside this time). How low can we go? Was it too far and too fast? No, we are not there yet, but the trade after the trade is my focus from here.
This is the most important line of my email. The trade after the trade (that is when the systematic supply/shorting eases), will be to bounce in early /mid September (I am thinking September week 2 and into quarter-end). I could see buy orders slowly hit global trading desks on Tuesday and scale higher into the end of the week after the payrolls event is now behind us.