Fast money & systematic sellers hit the structural bid

A clear shift in HF sentiment 

"There has been a clear shift in HF sentiment across the desk. Single-name short additions totaled $1.5-2bn last week, with Thursday marking the largest day of short additions in the last 3 months on MS books. Conversations across nearly all client types over the past two weeks settle on some sort of range bound to negative risk view at the Index level over the medium term" (Morgan Stanley)

CTAs dancing close to the door

Equity stop loss risk continues into this week, BofA quant team notes. "Last week we noted that our model implied CTA equity longs were at risk of hitting stoploss triggers. Any larger downside move should be accompanied by CTA unwinds and given positioning in US equities is typically larger, it could potentially amplify negative moves this week". (BofA Quant)

100th percentile

1. Global fundamental equity investor’s net length is around the 80th %-ile, levels not seen since late 2021.

2. The CTA community is long ~$148bn of global equities….putting it around the 100th %ile over a 12 month period.

3. Non dealer positioning in US equity index futures are at around $90bn of length in a record short vs record long range of -$120bn vs +$165bbn. (GS trading desk)

Liquidity

We are in full summer trading and top of book liquidity is acting accordingly (cut in half since late July: $25mm/side vs $11mm/side).

Source: GS trading desk

Least bearish in 1.5 years

FMS sentiment improving and now least bearish since February '22.

Source: BofA FMS

Big & bold buyer

The biggest buyer is back in town. Last week buyback volumes were +30% vs. 2023 YTD ADTV skewed toward Tech, Comm Services, and Consumer Discretionary. Majority of companies are in their open window period. August has historically tracked as a more active month. On the authorization front, 2023 YTD authorizations stand at $720B, the fourth most active year.

Source: Goldman

This is not what a "risk-on" top looks like

Risky vs. safe assets fund flows makes a serious retreat below the zero level.

Source: EPFR

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