What Just Happened: $25 Billion In CTA Liquidations Triggered, Long-Onlies Sell But Hedge Funds Are Buying Again

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