Loading ...“Buying Momentum Has Fizzled Out”: CTAs Are Now All-Inestimates of major hedge funds’ exposure to DM equities (30-day beta) show that more hedge funds are exiting longs now than was the case at the end of December. Of course, long/short funds and other fundamentals-based, value-oriented investors following bottom-up strategies are feeling out dips to buy. Prior to this, however, global macro hedge funds, managed futures funds, and other such top-down investors had already started moving last week to tentatively unwind long positions, partly in response to the apparent depletion of market-positive news.
Finally, going back to what has been a key market driver, namely (extreme) dealer delta and gamma positioning, McElligott writes that we “did see some of that “extreme” $Gamma and $Delta “drop-off” after last week’s expiry; however, enough was rolled “out and up” to maintain “still extreme” historic percentiles ($Gamma still 88th %ile since 2014; $Delta still 96th %ile).
So for those asking where is the next level (of gamma gravity), McElligott answers that “well outside of the meaningful aggregate $Gamma “in and around” here ($6.0B at 3300 strike, another $17B btwn 3310 and 3330)”, the “new” largest line is the +$6.3B at the 3350 strike” as dealers remain “very long” which in turn helps insulate the market from shocks while allowing the relentless creep higher in risk prices to continue unabated.
It also means that if and when the selling returns and the S&P breaks below 3,300, it’s going to be a long way down.