Record Systematic Shorts: Profit-Taking Pullback Ahead | Seth Golden

Goldman Sachs' chart, which tracks the rolling one-month change in positioning among systematic traders—primarily rule-based funds, including commodity trading advisors (CTAs), that rely on predefined models and algorithmic signals—points to a potential near-term pullback in US stock indices.

 

Record short positioning of systematic traders in Q1 2026—profit-taking pullback likely.

This segment of systematic traders has emerged as one of the most influential forces in equity markets in recent months. Having established aggressive short positions in spring 2025 and again in 2026, the group reached its longest and most extreme short exposure on record. Such outsized positioning suggests that systematic traders are now poised to take profits, thereby increasing the likelihood of a near-term correction in major US stock indices.

 

By early May 2026, a broad consensus had emerged among Goldman Sachs, JPMorgan, and Bank of America that the prevailing buying impulse in US equities had largely exhausted itself. Goldman Sachs specifically highlights that systematic traders (CTAs) remain positioned at sizable long levels—approximately $32–44 billion net in the S&P 500—but are poised to shift toward neutral or modest selling in flat or declining markets. Should key downside thresholds be breached, this could trigger substantial selling pressure exceeding $50 billion. 

 

Nobody wants puts on the Nasdaq: The put/call ratio has collapsed to its lowest

level since 2023. Near-term mean reversion and price consolidation next?

Taken together, these flows indicate that the momentum-driven buying that fueled the recent rebound has become stretched, pointing to a material decline in marginal demand. For individual retail investors, this setup implies an elevated risk of near-term exhaustion or pullback in major indices and technology stocks once systematic support diminishes. While continuation remains possible in a strong uptrend supported by further modest CTA buying, any meaningful stall or breakdown could rapidly amplify selling pressure.

 

Reference: 

Seth Golden, May 7, 2026.

 

US equity market breadth is at one of its lowest levels since the 1980s, reaching near-record lows on a long-term chart from 1985–2025. The latest reading sits far below average and one standard deviation below the mean, signaling extreme narrowness despite repeated new highs in major indices. This is driven by heavy capital concentration in a small number of AI, semiconductor, optics, and memory stocks, which are powering index gains while the vast majority of equities significantly lag. 

The S&P 500 just saw the largest call-buying day in history: $2.6T in call volume. Massive call buying forces market makers to hedge by buying stocks, pushing prices higher, triggering more hedging, and fueling a gamma squeeze. It’s powerful on the way up—and vicious on the way down when flows unwind or calls expire. This isn’t fundamentals driving markets anymore. It’s options flow moving the world’s largest index. The question isn’t if it unwinds — it’s when.   

ES (daily candles): Expect a pullback or sideways consolidation toward at least the neutral mean (solid black rising line)—the equilibrium point between the premium (overextended upper red) and discount (overextended lower green) zones. 

NQ (daily candles).
 Today, May 7 (Thu) is the scheduled ideal ITD #5 peak (± 4 CD) in US stocks.

 

Major banks show broad agreement on resilient 2026 S&P 500 earnings growth driven by AI and the economy, but diverge on the index target due to differing views on valuation multiples. Here is a combined comparison table of their latest 2026 forecasts (as of late April 2026): Goldman Sachs, JPMorgan, and Morgan Stanley are constructive, viewing the price-EPS divergence as a buying opportunity with prices likely to catch up to upward earnings revisions. Bank of America is the most cautious, anticipating further P/E compression despite solid EPS growth.   

See also: 

Jason Goepfert (May 4, 2026) - Hedge Funds Dump Tech, While Retail Piles Into QQQ.

Alex Krainer (April 27, 2026) - S&P 500 Dumb Money Confidence Enters Extreme Optimism.

Jeffrey A. Hirsch (May 1, 2026) - May Stock Market Performance in Midterm Election Years. 

Presidential Cycle Effects with a New President | Tom McClellan

The Presidential Cycle Pattern suggests that the stock market tends to follow similar patterns during the same points in prior presidential terms. The Presidential Cycle Pattern is calculated by averaging the S&P 500 performance over 4-year chunks. Variations can include factors like whether the president is a first-term or incumbent. 

 

  1st Term Presidential Cycle Pattern November 2024 - January 2026

The chart above compares the stock market performance under new presidents versus incumbents. The green line represents new presidents, while incumbent presidents tend to have a more stable market, especially in the first year of their second term, due to a stronger economy heading into reelection. New presidents often spend their first two years facing crises inherited from their predecessors, which can dampen investor sentiment. Incumbents, by contrast, don’t typically blame the previous administration and tend to have better market conditions in their second term.

There’s also a difference in stock market behavior after an election. When a new party wins, Wall Street initially celebrates, but the enthusiasm often fades when the new president faces the reality of governing, particularly in dealing with Congress. In 2020, the market behaved differently due to massive Fed intervention, with QE4 pumping $1 trillion per month. However, this was reversed in 2022 with quantitative tightening.

  1st Term Presidential Cycle Pattern November 2024 - November 2028

By the third year of a presidential term, stock market trends tend to be positive, with few exceptions like 1931 and 1939. By the election year, early performance differences between first and second term presidents are generally evened out. 

 

Looking ahead to Trump’s presidency, the market may initially react positively to expectations of tax cuts, deregulation, and government efficiency. However, if his policies lead to a balanced budget, historically, that could be bearish for the stock market.

 

Reference:
Tom McClellan (December 05, 2024) - Presidential Cycle Effects with a New President.

 

 

 

 

Support Holds on S&P 500, Bullish Pattern Targets 6,100s | Stephen Suttmeier

First support shifts slightly to the 5870s-5850s area on the S&P 500, which bent but did not decisively break last week. Continuing to hold this support would keep the pattern bullish, with upside potential to the July-September cup and handle. The early 2022 to early 2024 big base breakout targets are into the 6,100s. The cup and handle breakout and retest zone at 5,700-5,650 offers additional support.

The S&P 500 advance-decline (A-D) line reached a new high on Friday (11/22), and the NYSE Composite stocks A-D line hit a new high yesterday (11/25). This neutralizes the mid-October to early November bearish divergences for these market breadth indicators. It also provides bullish confirmation for the new highs on the NYSE and serves as a potential leading indicator for new highs on the S&P 500, increasing the likelihood of following bullish seasonality into year-end.

Stephen Suttmeier, November 26, 2024 [HERE], and [HERE]

 

Trend-wise, while the cap-weighed S&P 500 continues to float above its trendline, the chart above shows that the index is only two standard deviations above trend. At major extremes it can reach three standard deviations.

Jurrien Timmer, November 26, 2024.

Two Years of +20% Gains for the S&P 500: What's Next? | Michael Hartnett

Michael Hartnett, Chief Investment Strategist at Bank of America, notes that the S&P 500 is on track for a +20% return in two consecutive years. This has occurred only four times in the past 150 years: 1927/28, 1935/36, 1954/55, and 1995/96. 

 

Historical analysis of returns in the following two years reveals two key insights:

1. The S&P 500 is likely to experience another significant double-digit move in 2025.
2. Falling bond yields may serve as the "secret sauce" that helps the S&P 500 avoid the substantial reversals seen in 1929/30, 1937/38, and 1956/57, potentially catalyzing further significant equity gains, similar to what occurred in 1997/98.

Michael Hartnett (BofA), November 22, 2024. 

 

Decennial Cycle: Average annual change in the DJIA (1881-2023).

 

 Ned Davis Research.

See also:

Tom DeMark (November 15, 2024) - US Stock Market Nearing a Top Similar to 1929.

The Median Bull Cycle of US Stocks Lasts 32 Months │ Mark Ungewitter

The S&P 500 is up 68% over the 24-month period from October 2022 to October 2024. Since 1932, the median bull cycle has gained 73% over a 32-month span. We have counted 23 bull cycles since 1932. Of the 14 cycles that reached their two-year anniversary, six peaked in year three (43% of the time): 1953-1956, 1966-1968, 1970-1973, 1978-1980, 1987-1990, and 2016-2018.

 

The cyclical advance since October 2022 has reached its minimum targets, but is likely to extend further based on historical patterns. The average year-3 draw-up for all cases since 1949 (using similar labeling) is 12%, with a standard deviation of 9%, suggesting a peak for the S&P 500 of roughly 6,000 to 7,000 over the next eleven months. This is not a forecast, and it's somewhat unremarkable, but it may be useful for shaping expectations.

 

 

Reference:

Mark Ungewitter (November 18, 2024) - The Median Bull Cycle of US-Stocks Lasts 32 Months.

S&P 500 and the 3-Month VIX Relative to the VIX | Stephen Suttmeier

The 3-month VIX relative to the VIX (VIX3M/VIX) is below 1.0 and currently oversold. This tactical sentiment indicator signals fear heading into the 2024 Presidential election. We have observed similar conditions with the VIX3M/VIX being oversold ahead of the 2020 and 2016 Presidential elections. This suggests taking a contrarian bullish view on U.S. equities and supports the likelihood of a year-end rally.

Stephen Suttmeier, November 5, 2024

 

The spot VIX Index is currently above all of its futures contracts, in spite of a drop on November 5th. This is a condition reliably associated with price bottoms (and/or worrisome elections).

Tom McClellan, November 5, 2024 

Unconfirmed Uptrend According to Dow Theory | Stephen Suttmeier

The current position of Dow Theory is an unconfirmed uptrend, or bull market, with new highs for the Industrials (DJIA) and a lack of new highs for the Transports (DJT). 

Until the Transports confirm the highs on the Industrials, this bearish non-confirmation signal for Dow Theory is a market risk.

Stephen Suttmeier — October 17, 2024.

S&P 500 Cup-and-Handle Breakout Targets 5,930 & 6,180 | Stephen Suttmeier

The S&P 500 has experienced a bullish breakout from a cup-and-handle formation that formed between July and September, indicating potential upside targets of 5,930 and 6,180. 

Seasonal trends for the fourth quarter further support these targets. Last week’s tactical breakout appears strong, with support near the 5,775-5,745 range. Importantly, the cup-and-handle pattern remains intact as long as the S&P 500 stays above the 5,600s.

Stephen Suttmeier — October 15, 2024.