More Pain Ahead: CTAs "Sellers In Every Scenario" As Lack Of Liquidation Flush Keeps Biggest Traders On Edge

Stocks stormed higher, closing up 0.83% on the day as oil plunged as much as 30% from its overnight highs after President Trump said he would waive oil-related sanctions, have the US Navy escort tankers through the Strait of Hormuz and predicted that the war with Iran would resolve “very soon” as he confronted mounting economic and political pressure and days of dramatic fluctuations in oil markets. Sentiment was also lifted after the president said he didn’t believe the conflict would be over this week, but insisted the operation was ahead of schedule and looked to shore up investors increasingly concerned about energy prices. He vowed bombing “at a much, much harder level” if Iran disrupted oil supplies.

While it remains to be seen how Iran will respond to Trump's latest comments, it is clear that the market saw it as a potential "off ramp", something that was affirmed by a WSJ article late in the day reporting that "Trump Advisers Urge Him to Find Iran Exit Ramp."

Yet when it comes to markets, the storm clouds remain. Some of the more pressing risk overhangs were listed by JPMorgan's Market Intel desk which, as we reported earlier, turned tactically bearish, expecting the S&P to slide as much as 10% from recent highs, dropping as low as 6270.

A bigger problem emerges when looking at positioning inside the systematic community which has been the marginal price driver at multiple inflection points over the past year. 

According to Goldman's trading desk, due to the recent spike in volatility, CTAs are now sellers of equities in every scenario over the next week and month, with Goldman adding ominously, that "sell estimates over the next week are some of the largest we have seen." Here is the snapshot of conditional CTA Flows: 

Over the next 1 week… 

• Flat tape: Sellers $66.18B ($24.77B out of the US) 
• Up tape: Sellers $35.47B ($7.84B out of the US) 
• Down tape: Sellers $86.64B ($32.56B out of the US) 

Over the next 1 month… 

• Flat tape: Sellers $95.55B ($37.35B out of the US) 
• Up tape: Buyers $30.19B ($22.56B into the US) 
• Down tape: Sellers $186.73B ($65.1B out of the US) 

Goldman also notes that key pivot levels (i.e., sell thresholds) to watch in S&P:

• Short term: 6894 (stocks crossed the last week)
• Med term: this is the most important CTA level, and it is at 6763 (stock maanged rise above this thanks to today's last hour meltup)
• Long term: 6364 

This means that should the S&P close below the medium-term pivot level, a new and more powerful selling thrust will emerge from systematics. 

Also of concern is that after spending much of 2026 well in the green, dealer gamma is now the most negative it has been this year, meaning that instead of buffering moves, gamma now serves as an accelerant.

Historical Gamma at Spot ($mm) 

Regardless of whether the market moves lower or higher, gamma will remain negative for the foreseeable future, suggesting a period of heightened volatility ahead.

Gamma Profile Across Spot Levels ($mm) 

And move it will, as it doesn't take much to push the emini futures: as shown below, top-of-book depth is down to levels last seen around the Liberation Day plunge.

Why is liquidity is low? Because nobody has any conviction right now: the Goldman vol panic index is around the highest levels ever recorded..

... while the Goldman risk appetite indicator has also tumbled to liberation day levels.

At the same time, JPMorgan's Positioning Intel desk claims that far from an all clear "flush", there has been a lack of extreme de-risking with positioning currently neutral. One look at the market, which is essentially unchanged from where it was before the Iran was broke out confirms this. 

Which is not to say there has been no selling. As the JPM traders write, "the aggregate decline in positioning over the past 4 weeks caused our Tactical Positioning Monitor to trigger an “attractive” set-up for US stocks.  Hence, we could see a bounce over the next 2-4 weeks." That's the good news; the bad news is that "the set-up remains challenging due to the ongoing uncertainty around the situation in the Middle East and a lack of extreme de-risking with fairly neutral positioning."

Let's take a closer look at the latest JPM note, which can be found here for pro subs:

The bank's traders wrote over the weekend, that it already seemed that flows and sentiment intraweek were starting to weaken (at least in the US) as HF buying on Mon-Tues has flipped to selling on Wed-Thurs and Retail investor flows also turned more neutral in single-stocks from Tues-Thurs after some buying on Mon.  However, there’s still fairly little “stress” in recent days with limited de-grossing (less than 2z), average HF turnover in the US (i.e. no spike in volumes), limited alpha drawdown, and a lack of persistent ETF hedging in recent days. 

One thing to note is that, at least among hedge funds the amount of turnover (volumes relative to exposures) has spiked in Europe to +2.4z over the past week (and +1.7z in APAC) vs. +0.6z in N. America. The last time JPMorgan saw this much disconnect was in late Mar ’23 (post US Regional Banking crisis) and early 2022 (as Russia-Ukraine conflict kicked off). As HF turnover has spiked in Europe, net selling was also strongest in that region (-2z) vs. others, and implied volatility (V2X vs. VIX) is at the 95th %-tile on a 5yr basis.

What could get the JPM Positioning Intel team more bullish or bearish? 

• Signs of greater stress (e.g., extreme negative 1wk change in our TPM) and lower positioning…perhaps on a second move lower.  Or, a strong rebound through 7k on the SPX that would give confidence that the uptrend has resumed. 

Alternatively, what would concern the largest US bank? 

• The buying early this week, alongside weak price action afterwards creates potential risks that we could see more selling if we don’t get signs of de-escalation and the market doesn’t start to rebound soon.  

Finally, here is a selection of client questions the JPM positioning team has fielding discussing this week:

1. How much selling did we see? HFs net sold globally over the past 5 days (-0.5z), driven by EMEA (-2z) vs. NA (flat) and APAC (+0.3z). US retail single-stock flows were roughly neutral; ETF flows were the weakest in at least 2 years but tend to seasonally improve next month. CTA equity exposure fell most in Europe (Stoxx 50 from 94th to 59th %-tile; SPX from 70th to 62nd). TPM change: 1wk -1.8z; 4wk -1.5z.
2. Where are positioning levels now?  HF gross leverage fell just over 7% points (~2z) but remains at the 97th %-tile (5yr); net leverage fell just under 2% points (~1z) to the 68th %-tile. Eq L/S: gross -2.5% to 94th %-tile; net -1.1% to 71st %-tile. CTA equity positioning: HK ~40th, US 60th, EU 64th, Japan 77th, Korea 90th %-tile. US TPM level down to the 40th %-tile, near 2-year lows (ex. last Mar–May).
3. How are HFs performing? MTD, All Strategies -1.9% vs MSCI ACWI -2.7%, with declines mostly from beta rather than negative alpha. Eq L/S -2.1%; Quants ~+0.2%; Multi-Strats -0.6 to -1.1%. Tech is a pain point; drawdowns modest (-1% to -2%, ~1z), but risk rises if Semis vs. Software and Momentum vs. Analyst Sentiment unwind (3m Tech alpha and Semis/Software returns were near highest since 2018).
4. Is software getting bought or just shorts covered?  The semis/software gap was extreme last month across HF net exposures (Semis +4z; Software -3.5z); as of Thurs: Semis +3.4z, Software -2.7z. Flows show mainly short covering in Software: 5d net ~+1z driven by 1.3z shorts covered. Semis: slight selling this week (-0.3z) after -3z last week; de-grossing with longs sold and shorts covered (-1z both).
5. What changed in momentum and is it still at risk?  Quants reduced Mo’ earlier; Eq L/S exposure has now fallen to the 80th %-tile. Past episodes of net exposure drops at factor highs saw only modest, not persistent, pullbacks. Analyst sentiment appears to be bottoming: ~20% of max YTD drawdown reversed, while Momentum has retraced ~25% of its YTD rally. NDX vs. RTY is stabilizing; CTA turned relatively more bearish NDX vs. RTY near 5yr extremes; Size (large over small) dipped to ~1yr lows at the bottom of the post-2020 uptrend.
6. How are people reacting to moves related to the spike in Energy?  Energy was the most net sold sector in NA over 5d (profit-taking) despite the biggest gains; sold in EMEA; small buying in AxJ/Japan. Airlines saw a sharp drawdown; HF net selling hit -3z over the past week. Cyclicals face risk where Momentum and HF net exposure are heavy (Materials, Cap Goods, Semis). US sector ETF inflows to Energy/Industrials/Materials ~$20bn in 3m (~10% of AUM), largest since 2010, historically aligning with peaks in Industrials (e.g., early 2021, 2017, mid-2014, 2011). Energy positioning looks lower and could keep outperforming if oil’s gains persist; other cyclicals appear stretched.

More in the Goldman and JPMorgan notes available to pro subs.