Goldman Warns "Stretched Positioning" And "Exceedingly Bullish Sentiment" Paves Way For "Headline Shock" Tipping Point

Earlier this week, we cautioned readers that according to the latest note from Goldman's flow trading desk, positioning was extremely stretched and had led the market to be increasingly fragile and prone to outsized moves. Fast forward to today when another corner of the Goldman trading desk, namely Tactical Flows, echoes its 200 West trading peers and writes that while "positioning is stretched and sentiment reads exceedingly bullish" which "paves the way for outsized moves on headline shocks, the immediate flows set up remains supportive for US equities." Thus, the Goldman team writes, "we see the case for contained selloffs coupled with relief rallies as the most likely path forward in the near term."

Below we excerpt the main highlights from the note (available to pro subs in the usual place).