Massive CTA Demand Coming In

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by Tyler Durden
Sunday, Jul 10, 2022 - 10:11 PM

Excerpted from the Friday market close note by Goldman trader Michael Nocerino (full note and others from the GS trading desk, available to professional subs).

DESK ACTIVITY…Consistent chop higher throughout the week led by the under-loved pockets (growth) of the market as gross exposure continues to come in. It was risk off overnight following the assassination of former Prime Minister Abe weighing on Japanese equities, but steady throughout the European session, holding around unchanged and closing up ~50bps [SXXP +51bps]. Volumes were pretty dire throughout the session (SPX volumes were down 31% vs. the 20dma) with plenty of OOO bounce-backs. Following today’s NFP print, there is still either not enough evidence to bring a change in the backdrop (GIR still expect a 75bps hike in July) or the market doesn’t have faith in a more optimistic path and as a result we saw muted price action to finish flat on the day. The debate continues. CPI print coming up this week will be the main focus.

  • We have CTA’s that are to still to Buy... Latest estimates have 12B to buy over the next week in a flat tape.
  • Fund Flows: Global Flows à US... European equities have logged 21 straight weeks of outflows and Emerging Mkts had the largest outflow in 2 months, while the US continues to see inflows. We are expecting this to continue as the TINA narrative continues to hold true.
  • Buybacks: They are set to exit their blackout window on July 22nd, but would note they have been pretty active within their 10b5.1 plans. Ran 1x greater vs. 2021 FY ADTV this week.
  • Retail: Showing signs of life. Our Retail Most Bought Basket was +8.39 on the week. Bitcoin has rallied 16.33% off the lows. And AAPL, the retail magnet, has seen increased call volumes and is 7.55% to start the month.
  • Seasonality also remains strong – July is one of the strongest month of year with an average SPX return of 2.5% on a 10 year look back, while the first two weeks being incredibly strong. We are currently +3 since the start of July.