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"The Pain Trade Is To The Upside": 10 Reasons From Goldman's Trading Desk For A November Meltup

Tyler Durden's Photo
by Tyler Durden
Sunday, Oct 23, 2022 - 08:03 PM

First, it was Morgan Stanley's uber-bear Michael Wilson, who started off the week by flipping (tactically) bullish and calling for 4,150. Then, BofA's permabear Michael Hartnett pointed to "macro capitulation, investor capitulation, and start of policy capitulation" and predicted that a near-term bottom is here, as stocks rise then fall, before fully bottoming some time in H1 2023 when the next bull market begins.

Then Goldman's otherwise unbiased flow trader Michael Nocerino chimed in, asking rhetorically in his latest market note if it's time to "pounce on the bounce" providing a bevy of great charts to pick from to substantiate his 10 factors that can propel a year-end meltup. Then, on Thursday it was JPMorgan's turn when the company's head of cash trading said that "where we had firmly been in sell the rally mode, we think into year-end you can now buy the dip" adding that "seasonality is now on your side, retail flows seem to have stabilized, and every HF and mutual fund is positioned defensively." His view was echoed by that of trader Andrew Tyler, who echoed bullish sentiment from MS, Goldman (and his JPM colleague) and wrote that "given light positioning and low liquidity, we could see markets continue to drift higher." He said that the key to a more aggressive squeeze may lie with:

        (i) CTA buying – thought to activate in the 3800 – 3900 range;
        (ii) Buybacks – said to accelerate coming out of the earnings blackout window as soon as next week;
        (iii) Macro data – this is still a market driven by yields and the Nov 2 Fed meeting and Nov 10 CPI release loom large.

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