SP500 LDN TRADING UPDATE 14/04/25
WEEKLY BULL BEAR ZONE 5300/5290
WEEKLY RANGE RES 5640 SUP 5140
MONTHLY - ONE TF DOWN
WEEKLY - ONE TF DOWN (5482)
DAILY - ONE TF UP (5220)
5610 GAP FILL
WEEKLY ACTION AREA VIDEO TO FOLLOW AHEAD OF NY OPEN
GOLDMAN SACHS TRADING DESK VIEWS
This week felt like a year. Despite the fatigue, the stock market showed strong gains: SPX rose 5.7%, NDX climbed 7.4%, and RTY increased by 1.6%. However, investors face a challenging trading environment, especially with the long end of the treasury market showing fragility—10-year US Treasury yields jumped 48bps to approximately 4.47%. The stock market is no longer in control; a lower USD and higher yields will continue to pressure the S&P 500. Feedback indicates that the 90-day tariff pause did little to improve investor sentiment.
From a flow perspective, long-only investors and hedge funds ended as net buyers, with gains of $10 billion and $4.5 billion, respectively, driven by Wednesday's rally. Asset Managers chased tech and AI stocks, leading to intense short covering by hedge funds—the largest since August 2015. However, the optimism waned Thursday-Friday, as Asset Managers began de-risking tech and banks despite strong results from JPM and MS. Hedge funds continued to hedge with a pattern of shorting and covering. ETF volumes remained high at about 40%, compared to a 28% year-to-date average, and S&P Emini depth reached record lows.
Looking ahead, next week's SPX implied move is 4.4% during the shortened week (April 14-17). Key macro events include China's import/export figures, Q1 GDP, and retail sales/industrial production data, along with Powell's remarks and the ECB policy meeting. Earnings season kicks off with major reports from Goldman Sachs, ACI, BAC, C, JNJ, PNC, and others throughout the week.
In the US Fundamental Long/Short space, gross leverage rose to 202.7%, while net leverage increased to 45.2%, indicating significant net buying in US equities driven by long buys. Managers shifted into TMT and Cyclicals, moving away from Defensives.
In derivatives, activity reversed sharply, with lower volumes in volatility. The market seems exhausted, with clients hesitant to add new index hedges in options due to high implied volatility. However, demand for short-dated calls emerged to hedge risks from China negotiations, particularly in RH, NKE, and LVS. A notable trade involved buying 120k KWEB April 25th 35 calls. The SPX straddle implies a ~4% move through next week's options expiry.
Sector analysis shows Tech had its best week in about 30 months, driven by positive tariff headlines and cleaner positioning. Consumer sectors saw little demand, even on a strong day, with skepticism around WMT's performance. Financials face anxiety over earnings, with a preference for defensives and high-quality names. In Industrials, tactical investors leaned defensive, shorting tariff losers like SWK, while engaging in strategic trades ahead of earnings. Healthcare saw significant up moves following tariff pause headlines, with activity slowing as the week progressed. Investors are watching JNJ's upcoming earnings closely.
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Past performance is not indicative of future results.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!