EBC Markets Briefing | Wall St touches near two-week high
US indexes closed up on Tuesday and hit a near two-week high after softer producer prices data reinforced bets of an interest-rate cut by the Fed in September.
Systematic trading strategies continue to dump trades partly due to CTA’s programmes, adding to about $109 billion of global equity futures sold in the past month, Goldman Sachs said in a note on Tuesday.
The bank predicted that selling will likely continue into the autumn after August kicked off with a meltdown, and the second half of September might prove "a tricky trading environment."
Leverage used by hedge funds to increase the size of trades is at a record high for the last decade, according to data provided by the OFR's Hedge Fund Monitor. The complacency leaves the market vulnerable to bearishness.
In the 28 instances in which the S&P 500 got within 1.5% of confirming a correction, the index went on to do so within 20 cases in an average span of 26 trading sessions, data going back to 1929 showed.
In the eight cases which it did not confirm a correction, however, the index took an average 61 trading sessions to hit a new high. As such investors have ample reason to be cautious on buying the dip.
The S&P 500 is yet to go back above the 50 SMA and an uplift beyond the level may expose 5,500. On the flip side, it could consolidate above 5,400 for a while.
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