Goldman Sachs: Hedge funds are currently "surrendering" their selling, and the stock market is approaching a critical rebound point.

Goldman Sachs traders pointed out that the large-scale shorting by hedge funds and the continued selling by systematic investors have built up strong rebound momentum in the market. Once tensions ease in Iran, the stock market may experience a sharp reversal. According to statistics from Goldman's main brokerage team, hedge funds have been cutting their global stock positions for the sixth consecutive week, with the main force being new short positions. The selling in the past week was wide-ranging, with net sales recorded in all major regions. In Europe, macro products based on macroeconomic themes have increased their short positions to 11%, reaching a ten-year high. The team wrote in their weekly market data review up to March 26th, "The previous correction was still mild, but with the ongoing conflict in the Middle East, the market is quickly approaching technical oversold levels." The Nasdaq 100 index has fallen more than 10% from its high point, officially entering a technical correction; the S&P 500 index is also approaching this threshold. The STOXX 600 Index in Europe has fallen nearly 9% since March, heading towards its worst monthly performance in six years. In another report on hedge fund US positions, Goldman's team pointed out that "there are signs of surrender selling," suggesting that hedge fund pessimism is nearing its peak. Looking at the cumulative data over the past six weeks, the net selling volume in the US market is the third largest in the past ten years. Goldman stated that this round of selling is approaching the level seen during the collapse of the COVID-19 pandemic in 2020, but still not as intense as during the tariff impact in April 2025. Meanwhile, trend-following investors (CTAs) have sold about $190 billion in the past month, and the global net short position in stocks is currently around $50 billion. "The selling momentum of systematic strategy groups is nearing exhaustion," wrote Goldman's Cullen Morgan. "In the next month, under any scenario, we estimate that CTAs will be buyers, with significant upward asymmetry." Goldman also expects pension funds to buy stocks in rebalancing at the end of the month and quarter. In addition, around $7 billion in gamma exposure from options traders will expire at the end of the month, eliminating another market pressure point. "It feels like we are closer to the end than the beginning, but at the same time, it feels like we are playing a game without a traditional 'endgame,'" wrote Goldman's Brian Garrett in a report to clients. He admitted that while being praised as a bearish analyst for 'buying the dip' accurately is satisfying (many have already tried), rationally, they are not at that point yet.