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. 

Hedge Funds Dump Tech, While Retail Piles Into QQQ | Jason Goepfert

Hedge funds sold US tech stocks at the second-most aggressive pace in a decade (largest net selling since 2021), according to Goldman Sachs Prime Book data.

Everybody back in the pool: 21-day sum of daily fund flows in QQQ.

 

This institutional selling coincides with strong retail buying, as rolling 21-day QQQ fund flows hit the third-largest inflow in recent years—even as Nasdaq 100 prices rise. A classic smart money versus retail divergence. May 7 (Thu) is the scheduled ITD #5 peak (± 4 CD) in US stocks.

 

Reference:
Jason Goepfert (May 4, 2026) - Funds are selling while retail is buying.

Goldman Sachs Prime Book, as of April 30: Go with the flow.

The GS Prime Book reflects aggregated activity from Goldman's prime brokerage clients (a large but not complete slice of the hedge fund universe), so it's directional but not exhaustive. Similar insights sometimes come from JPMorgan or Morgan Stanley prime services reports. Goepfert specializes in sentiment indicators, including fund flows, options activity, positioning (e.g., hedge funds via prime broker data like Goldman Sachs), and retail vs. institutional behavior (e.g. Dump Money Confidence vs. Smart Money Confidence). Access requires a subscription, but he often shares highlights on X.

 

As of May 1, Dumb Money Confidence was very optimistic,

while Smart Money Confidence was neutral. 

See also:
Alex Krainer (April 27, 2026) - S&P 500 Dumb Money Confidence Enters Extreme Optimism. [May 3 update HERE] 

Richard D. Wyckoff (1931) - The Wyckoff Method of Trading in Stocks: Accumulation and Distribution Schematics. 

S&P 500 Forecast for May 2026 | Nicholas D. Savino

The primary forecast pattern for May.

 

The forecast focuses on market direction and timing rather than magnitude of price change. Key challenges in advanced cycle spectrum analysis (as implemented in Timing Solution) include Discrete Fourier Transform (DFT)-based spectral decomposition of price data into dominant cycles, which typically requires at least 3 years of daily observations for 30-day forecasting, with more than 5 years being optimal; pattern recognition; construction of composite cycle projection lines; and identification of initial directional biases for the upcoming month. There is also the inverse pattern, which is currently not favored by Nicholas Savino.  

 

The inverse forecast pattern for May.

 

How the April 2026 forecast played out. 

 

Reference:

Nicholas D. Savino (May 2, 2026) - S&P 500 Forecast for May 2026.

 

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

Namzes (April 19, 2026) - S&P 500 Bear Outlook Intact: Q3 3.5-Year Hurst Cycle Low.

May Stock Market Performance in Midterm Election Years | Jeff Hirsch

The S&P 500 has posted gains during the first three trading days of May in 19 of the past 28 years.

 

Early May Strength Turns to Chop Until Late Month Pop.

Weakness often emerges around the May 6 (Wed),  May 8-12 (Fri-Tue), and after May 18 (Mon). The final four days usually post solid gains (May 26-29, Tue-Fri), though the last day of May has been notably weak.

 

In midterm election years, May typically starts higher but turns broadly weak by May 5 (Tue), with softness persisting through most of the month.

 

Reference:

Jeffrey A. Hirsch (May 1, 2026) - Early May Strength Turns to Chop Until Late Month Pop.

 

 S&P 500 Midterm Election Year Seasonal Pattern, 1949-2024. 

 

S&P 500 Average Performance and Hit Rate per Day (1928-2024). 

   

In the Four-Year Presidential Cycle, May of midterm election years has historically been the weakest,

with all major indices avg. declines: DJIA –0.08%, S&P 500 –0.63%, NASDAQ –0.76%, NYSE –1.19%.

  

Historical S&P 500 data shows May averages just 0.38% gain since 1950 overall, but improves to 2.58% average and

9-1 record in the 10 years with April gains of 5% or higher, including the last seven straight positives post-1985. 

 

When the S&P 500 closes April at a new all-time monthly high since the early 1960s (17 instances shown), 
the remainder of the calendar year has been positive 100% of the time with an average gain of +10.35%. 

 

 

See also: 

Jeffrey A. Hirsch (December 29, 2025) - 2026 Midterm Election Year Seasonal Patterns of US Indices.

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

@Fiorente2 (April 20, 2026) - DJIA 2026 vs Top Three Midterm Correlated Years Since 1886.

Namzes (April 19, 2026) - S&P 500 Bear Outlook Intact: Q3 3.5-Year Hurst Cycle Low. 

Nicholas D. Savino (May 2, 2026) - S&P 500 Forecast for May 2026.

S&P 500 Dumb Money Confidence Enters Extreme Optimism | Alex Krainer

S&P 500 Dump Money Confidence (red line) has risen above 70%, signaling extreme optimism historically linked to consolidations or pullbacks. Meanwhile, the CNN Fear & Greed Index sits at 67 (Greed), and Smart Money Confidence (blue line) stays perfectly neutral at 50% ahead of this week's major news, rates, and earnings.

 

This is not a bearish crash call but a contrarian warning. Dumb Money Confidence above 70% often marks trend exhaustion—leading to sideways trading, 5–10% pullbacks, or simply pauses before quarterly earnings. These sentiment indicators are statistically reliable over decades but can't time exact market tops. 

 

Reference:
Alex Krainer, April 27, 2026.

See also:

Alex Krainer (March 27, 2026) - Classic S&P 500 Smart Money vs Dumb Money Rebound Setup.

Jeffrey A. Hirsch (March 25, 2026) - April Stock Market Performance in Midterm Election Years. 

Nicholas D. Savino (April 1, 2026) - S&P 500 Forecast for April 2026.

S&P 500 Bear Outlook Intact: Q3 3.5-Year Hurst Cycle Low | Namzes

The big picture remains unchanged: I still expect a bear market, with a buyable 3.5-year Hurst cycle low in Q3 2026. The 20-week cycle low arrived on schedule—just one day after the ideal March 27 (Fri) window outlined in my 2026 forecast.

 Chart 1: The new 20-week cycle could run higher into late May. The current 40-day cycle is now about halfway through.

I didn’t expect new all-time highs—my plan was for a rejection at the golden pocket retracement. Instead, a mix of CTA driven mechanical buying and Trump playing the market like a violin produced the blow-off top I’d anticipated back in February. The market always finds a way to humble you. 

 

The current 40-day cycle is roughly halfway complete (Chart 1). Next week should clarify whether the rally has further upside or is topping out. In my base bear case, April 17 was flagged as a potential turning point, but so far there are no signs of buying pressure slowing. Options expiration (OPEX) often serves as a pivot—either on the day itself or shortly after.

 
From a Hurst cycle perspective, the S&P 500 may still have several percent of upside left. That said, I’m not chasing it. As in February, I’ve stepped aside—risk/reward isn’t compelling for my multi-month holding framework, especially with weekend headline risk in play.

Timing-wise, the next 40-day low is due around May 7 (Thu). That should provide clearer insight into structure—namely the depth of the pullback and the strength of the rebound into late May (Chart 2). This sequence would then feed into a larger decline toward a higher-degree summer low. Leading indicators continue to point to a more meaningful downside move in the weeks ahead, so I remain heavily in cash.

  

 Chart 2: Options expiration (OPEX) often acts as a pivot, either on the day itself or a few days after. 

Next 40-day low due around May 7 (Thu), followed by a rebound into late May.

 

Short-term models have triggered a buy signal. If you’re leaning bullish, the new 20-week cycle could extend into late May, including a typical retest of the May 40-day low. However, given the negative pressure from the dominant 3.5-year cycle, my base case is that this rally is a false breakout—likely forming another divergent top and unlikely to persist beyond April.

It’s extremely rare for a 40-week cycle (top panel, Chart 3) to undercut its prior low and still go on to make new highs. In S&P 500 history, I could identify only one comparable instance. The usual structure in such cases is an M-shaped pattern with a clear bearish bias, as highlighted by the arrows.

 

Chart 3: It’s rare for a 40-week cycle to undercut its low and still go on to make a new high.

Bottom panel shows 20-week cycle, expected to synchronize with the 40-week cycle around July. 

That’s exactly how I expected the current 20-week cycle to unfold. That said, we now need price action to confirm emerging bearish signals. A bullishly configured cycle could still extend into June. While models have triggered a buy signal, participation remains narrow and volume is light. In my view, a downside resolution over the next few weeks remains the highest-probability outcome—but it still requires confirmation. Cycles define the setup; price action and models provide the trigger. The bottom panel shows the 20-week cycle, which I expect to synchronize with the 40-week cycle around July.

To illustrate what typically happens after a 20-week cycle low when the 40-week cycle has already failed, we can look back at Q1 2022 (Chart 4). In January of that year, the price made a lower low, confirming that the 40-week cycle had failed and signaling the start of a larger-degree correction.

 

Chart 4: Typical outcome after a 20-week low when the 40-week cycle has already failed.

 

This was followed by a series of bounces that retraced some of the decline but failed to make new highs. The market then rolled over and established new lows. This pattern is typical behavior roughly 99% of the time.That’s why I’ll be watching closely to see whether the current breakout turns out to be a deviation that ultimately resolves to the downside over the next few weeks, especially with the longer 3.5-year cycle exerting downward pressure.

I'm watching for a potential Wyckoff upthrust after distribution (UTAD) to play out over the next few weeks (Chart 5). For the bulls, it's critical to keep any pullbacks shallow and hold above the 2026 opening price at SPY 685.71, as well as above the overall consolidation range. 

 

Chart 5: Watching for a potential Wyckoff UTAD to unfold in the coming weeks.

Doing so will help avoid the setup looking like a classic false breakout. I've also overlaid the 2022 bear market in yellow for reference, in case the bearish thesis unfolds and we see a similar structure develop.

Reference:
Namzes (April 17, 2025) - S&P 500 Bear Outlook Intact – Q3 3.5-Year Cycle Low.

See also:
Namzes (January 10, 2026) - 2026 Hurst Cycles Playbook for the S&P 500. 
Namzes (January 1, 2026) - 2026 US Stock Market Forecast: 25% Bear Market and Recovery.

Krasi (April 19, 2026) - This is a 4-year cycle high—don’t get too excited.

David Hickson (April 7, 2026) - Twenty-Week Cycle Trough Or Greater? (video)

S&P 500 After Rapid 10% Gains: +17% Avg One-Year Return | Alex Krainer

Historical S&P 500 data shows that sharp 10% rallies over a 10-day span tend to exhibit strong follow-through. On average, returns have been approximately +0.6% after one week, +2.5% after one month, and +17% over the following year.

Rapid 10%+ bounces in the S&P 500 (weekly candles), 1980 to 2026.

A review of the weekly S&P 500 chart from 1980 to 2026 highlights multiple instances of these "rapid +10% bounces," marked by green and red arrows. In most cases, these moves were followed by continued upside, though there were notable exceptions—such as the period around 2000.

 

Alex Krainer argues that the current setup differs meaningfully from the 2000  episode. He notes the absence of broadly synchronized overbought conditions among megacap stocks today, and emphasizes that the more significant declines in 2000 occurred only after the index had already fallen below its 40-week moving average.
 

S&P 500 RSI readings above 70 have led to pullbacks in 8 of the last 10 cases over two years, with the other two resulting in flat consolidation. The daily chart (May 2024–April 2026) marks these signals with red arrows for pullbacks and one green arrow, alongside recent price action near 7,000. This suggests an 80% likelihood of a near-term pullback, though prior corrections since the 2025 rally have been relatively mild.

Reference:
Alex Krainer (April 16, 2026) - Rapid S&P 500 10% rallies in 10 days historically show strong follow-through. 

 

Jeffrey Hirsch notes that the S&P 500's 7.57% gain in the first 10 trading days of April 2026 ranks as the second-strongest start to April since 1950.

Gains averaged +10.8% for the rest of the year, with full-year returns positive in 91.7% of cases (+16.2% avg.).

Historically, such powerful early-April momentum has been a bullish signal: in 20 of 24 comparable cases (83.3%), the market delivered further gains over the remainder of the year, with an average advance of +10.8%. Full-year returns were positive in 22 of those 24 instances (91.7%), averaging +16.2%. Hirsch’s data also segments April starts into performance tiers, with 2026 firmly in the top group—where subsequent returns have consistently outpaced those seen in the middle and bottom tiers.

Classic S&P 500 Smart Money vs Dumb Money Rebound Setup | Alex Krainer

A contrarian signal is flashing for the S&P 500 near 6,477. Smart Money Confidence (blue line) is climbing to 0.6 while Dumb Money Confidence (red line) drops to 0.4. This split occurs amid Extreme Fear, with the CNN Fear & Greed Index at 18, despite broader bearish technicals and geopolitical volatility.

» Smart money confidence is growing while dumb money confidence falls. Meanwhile, the Fear & Greed Index has hit
Extreme Fear. Yes, the setups across the board look ugly, but chasing shorts here is riskier than remaining patient. «

 

Historically, this exact divergence—rising institutional confidence against falling retail optimism—has preceded S&P 500 rebounds roughly 70% of the time, per SentimenTrader backtests. It suggests the current sell-off may be exhausted, offering a high-probability upside reversal once fear peaks.

Reference:
Alex Krainer, March 26, 2026.

 

March 27, 2026 Update: This level of Extreme Fear (10) has been seen at previous bottoms, including those that preceded bear market rallies in 2022. The shortest bounce before lower lows occurred in 2025. A bullish divergence is now appearing, which validates the thesis. 

See also:
Branimir Vojcic (March 23, 2026) - S&P 500 Outlook: Late March Low, May Peak, October Low.