Market News
Goldman Traders Say Market Enters December With ‘Cleaner’ Setup - BLOOMBERG
BY Natalia Kniazhevich
(Bloomberg) -- The S&P 500 may end November essentially flat, but the path forward looks meaningfully clearer as volatility calms down, stock market breath improves and trend-following strategies turn into buyers, according to Goldman Sachs Group Inc.’s trading desk.
Several indicators point to stabilization heading into December. Market breadth, measured as the five-day average of S&P advancers minus decliners, collapsed earlier this month to minus 150, indicating “a pretty bad damage beneath the surface,” Goldman’s Lee Coppersmith wrote in a note to clients. Heading into Thanksgiving, it rebounded back to the +150 area. “It’s a big shift – broader participation, not just a narrow squeeze, and another sign that the market cleared a decent amount of stress mid-month,” he added.
Goldman’s Volatility Panic Index is telling a similar story. It currently sits at five, just above its three-year average and well below its early-November highs.
Positioning among so-called systematic strategies has also reset. Roughly $16 billion of S&P 500 Index selling hit the tape over the past month, Goldman traders estimate, adding that those moves contributed to the stock market declines. With that de-risking largely absorbed, the bank’s baseline for the next month flips to modest net buying of about $4.7 billion.
“That leaves us heading into December with a cleaner starting point than we had a few weeks ago,” Coppersmith wrote.
The S&P 500 is on course to post a 0.2% loss in November, with equities erasing nearly all of their declines on expectations for an interest rate cut at the Federal Reserve’s next meeting and positive momentum stemming from the artificial intelligence trade.
