Bearish Trade on the Horizon for US Equities, Warns Goldman Sachs
Global markets managing director Scott Rubner of Goldman Sachs has identified an impending bearish trade for US equities due to increased market crowding and dwindling dip-buying support.
Key Factors Contributing to Pessimism:
* Dip-buying momentum is waning.
* Trend followers (commodity trading advisors, or CTAs) are positioned for downside trades, estimating potential sales of $61 billion in US stocks.
* Corporate buybacks, a source of support, will end on March 16.
* Hedge funds have increased risk allocation, with global equities witnessing the highest net buying in two months.
* Retail buying force, which has fueled recent gains, may fade in March.
Recommended Trading Strategies:
Rubner suggests tactical downside trade ideas such as:
* Dual binary and put spread options on the S&P 500 Index
* Lookback put hedges
* Combinations of trades in the Euro Stoxx 50 and euro-dollar exchange rate