While only one week ago it seemed unlikely that systematic/CTA sell triggers could be activated any time soon – for the simple reason that the S&P was trading at a record high and key sell thresholds were hundreds of points lower – after the recent rout, investors are growing nervous that very soon we may enter CTA liquidation territory.
And indeed, in a note from the BNP markets desk ( available to pro subscribers), the bank warns that “that is exactly what could happen” as a result of Wednesday’s move, which for those who missed it, saw the S&P fall 2.3% (worst day since Dec ’22), Nasdaq fell -3.7% (worst since Oct ’22), the Mag Seven plunged -6% (worst since Nov ’22) with AI winners down -5% to -10%, and Index vol spike (VIX> 18 for first time since April); the sharp drop also meant the S&P 500 broke its 356 day streak without a down 2% (or greater) move – the longest streak since 2007’s 943 days without a down>2% move.
On day 357, the streak without a 2% drop finally ended
*S&P 500 FALLS 2.3% IN BIGGEST DECLINE SINCE DECEMBER 2022 (chart Bespoke) pic.twitter.com/3YHYfxE45C
— zerohedge (@zerohedge) July 24, 2024
