CTA ammunition exhausted and positions overheated! Technology giants sounded the stock market correction alarm before the performance disclosure.

Senior executive John Flood from the financial giant Goldman Sachs Group, Inc. stated that as the positions in the US and global stock markets become increasingly crowded, and with the strong buying power of one of the key institutions, CTA, likely turning into selling power, stock market investors should prepare for a certain degree of short-term pullback. Therefore, as the earnings reports of five major super technology giants such as Alphabet Inc. Class C, Microsoft Corporation, and Apple Inc. are about to be disclosed this week, including Flood and other strategists at Goldman Sachs Group, Inc. have warned that the exhaustion of CTA margin buying, pension rebalancing selling pressure, hedge funds deleveraging, and deteriorating market breadth indicators may collectively trigger a short-term pullback. However, the Goldman Sachs Group, Inc. strategists team emphasized that the long-term bullish prospects of the stock market have not been overturned, and the pullback is instead seen as a major opportunity to buy on dips. The senior partner and head of Americas stock market execution services at Goldman Sachs Group, Inc. forecasted in the latest research report that the S&P 500 index will continue to rise significantly by the end of this year, but he is warning that the benchmark index may signal a potential sharp sell-off in the short term. However, he also stated in the report dated on Sunday that this should be seen as a significant opportunity to buy on dips. From the soaring of AI to overheated positions, Goldman Sachs Group, Inc. sounds the alarm for a pullback! However, it emphasizes that the downturn is actually a buying point. The latest market prediction of the Goldman Sachs Group, Inc. strategists team is not "the end of the bull market," but rather a short-term surge driven by the AI investment frenzy being too strong, positions being too crowded, and margin buying power declining. Therefore, US and global risk assets are likely to experience a round of pullback; however, this pullback is more likely a rebalancing within the bull market rather than a trend reversal. Strategists like John Flood made it clear that after buying about $53 billion worth of assets in the past month, CTAs are no longer marginal buyers, pension funds rebalancing by the end of the month may bring in over $25 billion worth of selling pressure, and hedge funds are deleveraging during the rebound; however, he also expects the S&P 500 to be "significantly higher" by the end of the year, defining the potential pullback as a buying opportunity. Systematic strategy fund CTA - the so-called "fast money" CTA fund flow is likely to be a key selling catalyst. The Goldman Sachs Group, Inc. strategists team led by Flood stated that after buying about $53 billion worth of equity assets in the past month, the so-called commodity trade advisors fund, CTA, currently holds a long position of about $32 billion in the S&P 500 index and may no longer be the main buyer of the index in the short term. According to the Goldman Sachs Group, Inc. trading desk model, looking ahead, they may temporarily turn into sellers as the stock market tends to be temporarily flat; if the stock market declines, the selling pressure will intensify. The large-scale pension fund rebalancing expected by the end of the month is also expected to weigh on the US and global stock markets. The Goldman Sachs Group, Inc. strategists team led by Flood predicts that pension funds may sell more than $25 billion worth of US stocks, a potential selling scale expected to be one of the 15 largest sell estimates by the institution since 2000. "If we exclude the quarter-end days - which also include monthly and quarterly rebalancing - this will be the largest monthly selling estimate in history," Flood and other strategists added. Meanwhile, in terms of hedge funds, as fund managers actively cover short positions in the recent rebound, the overall leverage ratio has significantly decreased. According to data from the Goldman Sachs Group, Inc. large brokerage business, overall trading activity last week saw the first decline in 13 weeks, indicating that leveraged hedge funds may have little room to buy stocks in the short term. According to statistics from the institution, hedge funds have cut the total size of their long and short positions on stocks to the largest extent since September last year, in an attempt to reduce risk using the rebound in the US stock market. By the close of Tuesday's US stock market, the S&P 500 index and the Nasdaq 100 index took a breather on Tuesday, significantly falling from record highs after a sharp rise in April. Driven by resilient corporate earnings and optimism in easing US-Iran tensions, these two benchmark indices are still expected to achieve their strongest monthly performances in years. The rapid rise has pushed key indices into overbought territory and significantly increased investor exposure. The Goldman Sachs Group, Inc. US stock market sentiment indicator has reached levels indicating crowded positions. At the same time, market breadth indicators have significantly deteriorated. The Philadelphia Semiconductor Index, known as the "semiconductor barometer," recorded an 18 consecutive rise to a new record, and the gap between the 52-week highs of the S&P 500 index and its median components is at one of the widest levels since 2020, highlighting how concentrated this rally is in industry leaders of the AI computing industry chain such as Intel Corporation, AMD, Broadcom Inc., and Micron. This has made stock assets increasingly vulnerable to any reversal, as in the coming days, some of the largest technology giants in the world - Alphabet Inc. Class C (GOOGL.US), Microsoft Corporation (MSFT.US), Amazon.com, Inc. (AMZN.US), Meta (META.US), and Apple Inc. (AAPL.US) - are set to announce their latest quarterly results. Do not chase high positions in the most crowded and overheated locations, investors' short-term entry points may come from the upcoming pullback More precisely, Goldman Sachs Group, Inc. is concerned about the violent fluctuations triggered by the earnings reports of the five major technology giants + large-scale selling and selling pressure from CTA/Pensions + overheated semiconductor stock prices closely related to AI computing infrastructure + short-term oil/interest rate pressures due to the stalemate between the US and Iran, which may collectively trigger a brief round of "technical/positional retracement." However, in the medium term, as long as AI capital expenditures, corporate earnings, share buybacks, and the cash flow of technology giants can still strongly support the fundamentals, Goldman Sachs Group, Inc. still believes that the main trend remains an upward trend within the bull market tone. It is understood that Goldman Sachs Group, Inc.'s head of Delta-One, Tony Pasquariello, has a similar attitude to the senior executive John Flood at Goldman Sachs Group, Inc.: that the bull market is far from over, but it is not suitable to chase higher prices or to short sell; it is more suitable to retain core long positions and wait for a dip after a pullback. In other words, Goldman Sachs Group, Inc. is not sounding a retreat, but it is reminding investors: do not chase highs in the most crowded and overheated positions, at least for now, the truly valuable entry points for stock assets are likely to come from the upcoming short-term downward retracement. Tony Pasquariello emphasizes the risk of a partial "topping out" in technology and semiconductor industries. The Philadelphia Semiconductor Index's single-month surge, RSI technical indicator soaring, and extreme deviation from the 200-day moving average indicate that the narrative of the right tail of the AI computing chain has been quickly, concentrated, and even with some short squeeze pricing. The key here is not that there is no demand for AI, but that the market has become too crowded in trading the "perpetual upward revision of AI capital expenditures, infinite extension of semiconductor profits." The Goldman Sachs Group, Inc. US stock market sentiment indicator has risen to levels indicating tight positions, historically such readings are often associated with pressure on future returns in the coming weeks; coupled with the concentration of technology giant earnings reports, market breadth deterioration, the rally increasingly relies on a few large AI stocks, hence the short-term margin for error naturally decreases. Goldman Sachs Group, Inc.'s head of Delta-One, Rich Privorotsky, warned about the combined pressure of oil prices and interest rates. If the situation in Iran cannot be normalized quickly, the impact of oil price spikes will not only be a one-time sharp shock, but it will continue to transmit through gasoline, shipping, inflation expectations, corporate costs, and nominal interest rates. Goldman Sachs Group, Inc. has raised its average forecast for Brent crude oil to $90 to $100 in the fourth quarter, and even discussed potentially higher oil price risks in extreme scenarios, indicating that the energy market is re-pricing the sustainability of the ongoing conflict. If oil prices remain high, the Fed will find it more difficult to quickly shift to an easing stance, and long-term bond yields of 10 years and above are more likely to come under pressure, directly challenging the discount rate assumption of highly valued technology stocks. From an investment strategy perspective, the AI computing bull market narrative is not over yet, but this earnings season is a "ROI verification moment," not a "celebration." The overall direction of AI investment remains bullish, but the real change is that capital will continue to concentrate from broad AI concepts to the hardest, tightest, and clearest segments of cloud computing power orders. Whether the global stock market bull market continues to surge depends on the five major technology giants providing clear expansion trajectories for three things simultaneously: continuing strong AI capital expenditures, an increasingly clear AI-related revenue realization path, and no out-of-control profit margin/cash flow pressures. Morgan Stanley's logic is consistent with Citigroup: the first signal to judge AI investment returns is the acceleration of business revenue closely related to AI, rather than just the scale of AI CapEx (AI capital expenditures), meaning that these trillion-dollar giants can maintain a strong trend driven by the AI wave in the backdrop of steady growth in AI revenue/AI monetization pathways. Alphabet Inc. Class C must prove that cloud computing business and cloud AI revenue can absorb depreciation pressures; Microsoft Corporation needs to prove that Azure computing demand still exceeds supply; Meta needs to prove that AI-driven ad cash flow growth is enough to cover AI infrastructure expansion; and Amazon.com, Inc. must prove that AWS big client commitments and the clear path to realizing AI computing infrastructure capacity by 2027-2028 are trustworthy. Meanwhile, another Wall Street financial giant JPMorgan Chase has raised its year-end target for the S&P 500 to 7,600 points, with one of the reasons being the profit upgrades driven by AI and the momentum in the technology sector, indicating that mainstream funds on Wall Street still tend to believe that the AI trend is not over yet.