Some interesting observations by the Goldman sales and trading desk:
Every sector closed positive today with the biggest theme being the reversal in Momentum (SPX +1.4% vs our Momentum pair -2.3%) driven by outperformance of the Short Momentum basket (Long Momentum +99bps vs Short Momentum +3.3%). This is the momentum pair’s largest underperformance YTD and the 5th largest underperformance over the past 2 years. Below shows 1D, YTD and 12M performance of S&P Level 1 sectors.
S&P e-minis have now rallied 5% off the YTD low print (1804.25). As we see it, the argument for a continued short-term, tactical bounce in S&P is:
- month-end pension rebalancing (GS expects $14bn of equities to buy as of 22Jan );
- majority of corporates exiting their buyback blackout window next week;
- perceived reduction of CTA driven equity supply and
- oversold conditions (Kostin’s Sentiment Indicator was at 3 last Friday)
I still think the market is going to look to re-initiate shorts between 1925-1950.
Speaking of corporate buybacks….we’re already seeing a slight pick-up in activity. Corporates have comprised ~15% of our buyside flow over the past 2 sessions. This compares to an avg of ~5% YTD.
via Zero Hedge http://ift.tt/2051L0h Tyler Durden