Panic Index Skyrockets, Hedge Funds Sell Off! Goldman Trading Desk Warns: "U.S. Stocks Not Optimistic"
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The S&P 500 Index has fallen for five consecutive weeks, with technicals breaking down across the board. Goldman Sachs traders bluntly said “the data is not optimistic,” but signals such as nearly exhausted systematic selling, month-end pension buying, and record CTA net short positions are accumulating momentum for a potential rebound.
Goldman Sachs senior trader Cullen Morgan wrote in a weekend report, "Friday was one of the most uncomfortable trading days in recent memory." The S&P 500 index has recorded a rare five-week losing streak, one of few since 1970, and the longevity of this decline even surpasses the shocks of the 2020 COVID pandemic and the 2025 "Liberation Day" sell-off.
Goldman’s US stock volatility panic index latest reading is 9.2 (out of 10), it has remained in the "panic zone" (above 8.5) for 17 consecutive trading days, marking one of the longest panic streaks in the past 15 years.
Meanwhile, the index has fallen below all key moving averages and technical support levels, including the CTA strategy sell threshold; the Nasdaq has retraced more than 11% from its historical high, officially confirming entry into the correction zone.
Historically Rare Five-Week Decline
Cullen Morgan pointed out that the S&P 500’s five-week consecutive drop since 1970 is extremely rare, with the last occurrence during the 2022 recession panic. Notably, the 2020 COVID crash and recent "Liberation Day" sell-off did not extend to a fifth week—the duration of this round of losses has entered a historically rare range.
Goldman Sachs has conducted forward-looking yield calculations on the above historical cases, and the conclusion is "not encouraging." Morgan admitted, most charts tracked by Goldman have not yet issued clear oversold signals, but some indicators are beginning to show signs of capitulation.
Panic Sentiment Runs High
Several Goldman internal indicators show that market panic is at extreme historic levels:
Hedge funds continue net selling: Goldman’s prime brokerage weekly report shows hedge funds have been net sellers of US stocks for six consecutive weeks, with the most recent net selling ranking as the third largest in the past decade, mainly due to simultaneous unwinding of both long and short positions in individual stocks, as well as contributions from net short macro products.
Net leverage hits largest drop in nearly a year: The US fundamental long-short net leverage rate fell 3.1 percentage points this week, marking the largest single-week drop since the week of "Liberation Day" in early April 2025.
Panic index sets 15-year record: Goldman’s US equity volatility panic index reached 9.2 (out of 10) and has remained in the panic zone for 17 consecutive trading days, marking one of the longest consecutive panics in the past 15 years.
Sentiment indicator nears historic buying point: Goldman’s US equity composite sentiment indicator dropped to -0.9 this week, reflecting a sharp reduction in overall equity exposure. Historical data shows that when the sentiment indicator is below -1, subsequent stock returns are often above average, and the signal is more reliable when the indicator plunges below -1.5.
Short-Selling Pressure Near Extremes
From a technical perspective, current short-selling pressure is nearing historical extremes.
Gamma shorts reach peak: After a record-setting $5 trillion triple expiry options expiration last week, dealer gamma positions have plummeted. By Friday's close, dealers' net short gamma exceeded $7 billion, the second lowest level ever, meaning markets could see accelerated moves in both directions.
CTA is close to a long reversal threshold: According to Goldman’s estimates, system strategies investors have sold about $85 billion of US stocks over the past 30 trading days, near record levels. Currently, CTA net short positions have reached roughly $37 billion. A Morgan report notes, “there is asymmetry on the upside—in any scenario over the next month, we expect CTA to be buyers,” meaning that any positive news could trigger a wave of short covering.
Nasdaq signal: Among the Nasdaq 100, currently fewer than 15% of component stocks are above their 50-day moving average. Historically, this ratio has often indicated the emergence of short-term rebounds.
A structural feature worth noting is that although the market feels extremely volatile, realized volatility between closing prices is still below 15. However, one-month implied volatility for the S&P 500 has jumped to 26, and the spread between them “is one of the widest we’ve ever seen”—this divergence indicates the demand for options protection far exceeds what is reflected in actual price volatility.
Against the backdrop of continued declines, the report lists several structural catalysts that could alter the market’s direction:
Month-end pension rebalancing: Goldman’s model predicts US pensions will buy about $19 billion in US equities at month-end, at the 89th percentile in history.
Seasonal pattern: Since 1950, April’s average S&P 500 gain is 1.35%, making it one of the stronger seasonal months historically.
Options market pricing: Despite a shortened week due to Easter, implied weekly volatility for S&P 500 options this week still exceeds 3.4%, one of the highest single-week implied volatility readings in the past five years.
Overall, near-extreme short pressures and other rebound momentum are accumulating, but the precondition for a rebound is an easing in Middle East tensions. For now, the broader US market outlook remains uncertain.
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