Goldman Sachs warns: The S&P 500 fell below the 6725 key point, which may trigger a $40 billion selling pressure by CTA hedge funds next week
Goldman Sachs warned that the U.S. S&P 500 index officially fell below the 6,725-point technical level that the market is highly concerned about. This breakthrough is equivalent to triggering a sell signal from trend-following hedge funds and may sell off nearly $40 billion in stocks in the next week.
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According to Reuters, Goldman Sachs on November 20 An analysis report submitted to clients on the same day pointed out that the S&P 500 Index of the US stock market officially fell below the 6,725-point technical level that the market is highly concerned about that day. This breach was equivalent to triggering a sell signal from trend-following hedge funds. It may sell nearly $40 billion in stocks in the next week, further exacerbating the downward pressure on the market.
The total selling pressure may reach up to US$65 billion
Goldman Sachs clearly pointed out in the report that trend-following hedge funds (CTA) have long regarded 6,725 points as a key decision-making threshold. Once it falls below, they will choose to close their existing long positions, or even increase their short positions to bet that the stock market will continue to fall. In this regard, Goldman Sachs calculated based on its latest model that the stock market may see about US$39 billion in systemic selling in the next week; if the decline expands, the total selling pressure may reach a maximum of US$65 billion.
The operating logic of these trend-following hedge funds is very simple: use quantitative signals such as trading volume, price trends or price changes to automatically determine the direction of the start of the trend. They had accumulated about $150 billion in long positions in stocks before the current selloff, but now they are facing the risk of a trend reversal.
In addition, Goldman Sachs also reviewed history and pointed out that the last time the S&P 500 index fell below a similar important trend signal was in October this year, and the previous one occurred on April 2, when US President Trump announced a large-scale tariff proposal. Market participants are worried that if this selling pressure kicks into full gear, it may make U.S. and global stock markets more difficult in the short term.
