U.S. stocks' net selling pressure has approached the COVID-19 crash peak. Goldman Sachs: CTA will fully shift to buying in the next month.

U.S. stock selloff pressure is nearing historical extremes, but the conditions for a rebound are quietly building up.

Data from Goldman Sachs’ commodities brokerage trading desk show that hedge funds have cut their global equity holdings for six straight weeks. The scale of net selling ranks third in the past decade, approaching the peak level seen during the COVID-19 crash. Meanwhile, Goldman analysts noted that trend-following systematic investors (CTAs) have sold about $190 billion worth of stocks over the past month in total. They currently hold about $50 billion in net short positions across global equity markets, but their selloff momentum is starting to run out.

Goldman believes the above extreme positioning is creating asymmetric upside room for the market. The firm estimates that within the next month, CTAs will turn into net buyers regardless of how the market trades. At the same time, pension end-of-quarter rebalancing buying is expected to move in. In addition, the options market makers’ approximately $7 billion negative gamma exposure will expire at month-end, and multiple technical headwinds are likely to ease in tandem.

Hedge fund selling near a “capitulation” signal

In a weekly market data review report covering through March 26, Goldman’s commodities brokerage team said the latest round of de-risking by hedge funds has broad coverage, with net selling appearing across most regions. In Europe, the macro product short exposure rose to 11%, the highest level in a decade.

In the U.S. market, in a separate report, Goldman’s team said, “Some signs of capitulation are starting to show,” suggesting that funds’ pessimism about the market is approaching its limit. On a rolling six-week basis, the scale of net selling in U.S. stocks is the third-highest in the past decade and is nearing the level during the COVID-19 selloff, though it remains below the peak during the April 2025 “Liberation Day” tariff shock.

Judging by market performance, the pullback previously viewed as relatively mild is deepening. The Nasdaq 100 index is down more than 10% from its peak, officially entering a technical correction range; the S&P 500 Index is also nearing the same threshold. Europe’s Stoxx 600 has fallen nearly 9% cumulatively since March and is poised to record the worst single month in six years.

CTA selling pressure is fading, and rebound asymmetry stands out

Changes in systematic investors’ positioning are another key variable for the current market. Goldman analyst Cullen Morgan said that CTAs have sold about $190 billion worth of stocks over the past month in total and currently hold about $50 billion in net short positions across global equity markets, but their selloff momentum is fading.

“Systematic investors are running out of ammunition,” Morgan wrote. “The asymmetry points upward—we estimate that over the next month, CTAs will become buyers under any scenario.”

Meanwhile, Goldman’s model shows that pensions will buy stocks in month-end and end-of-quarter rebalancing operations. In addition, the options market makers’ approximately $7 billion negative gamma exposure will expire at month-end, automatically removing this ongoing technical factor that has been weighing on the market. With the above multiple factors stacked together, they form a potential technical rebound base in the near term.

Geopolitics remains the biggest wildcard, and Goldman rejects a “buy the dip” conclusion

Despite extreme technical signals, Goldman internally remains cautious about whether the market has already bottomed. Goldman’s Brian Garrett wrote in a client note, “It feels like we’re closer to the finish line than to the start, but this game doesn’t have a ‘number of rounds’ in the classic sense.”

Garrett noted that there is currently no clear timeline that any market participant can provide for the Iran war. A downgrade requires consensus among multiple parties, and that sign is not clearly evident at this time.

“Even though, as a sell-side analyst, it’s a pleasant thing to ‘successfully call the bottom’—plenty of people have tried to do that—honestly, we’re not there yet,” Garrett said.

Goldman’s overall view is that the easing of extreme positioning and technical pressures provides the market with asymmetric upside room, but a true trend reversal still depends on substantial geopolitical de-escalation.

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