Yesterday we revealed why the market has become so painfully jumpy in recent days: exiting last week, the bearish sentiment had fully engulfed the long-only community, which as Goldman's trading desk documented, meant they finished the week -$6.5bn net sellers, pushing their aggregate flows to two month lows and just shy of the year's worst levels, deep in negative territory. At the same time, multiple sectors were finally seeing a bid thanks to modest BTFD interest from hedge funds, which after several weeks of relentless degrossing - mostly selling - ended the week $1.8 billion net buyers (for more see "Rollercoaster Divergence: "Long-Onlies" Liquidate As Hedge Funds Buy The Dip").
The issue, as we also briefly touched upon yesterday, is that while hedge funds traditionally are early to call reversals, momentum remains clearly to the downside, and the systematic community is in full-blown bearish mode, especially after the S&P broke below the short-term key pivot level for the S&P at 5,475, which was first breached last Wednesday when the S&P broke its stretch of no 2% drops, and the Nasdaq tumbled the most in almost two years.
