Goldman Sachs Says “Buckle Up”

Why CTA Flows and MenthorQ Help Explain Choppy Markets

When you hear these headlines from investment banks like Goldman Sachs it is usually not about valuations being stretched or earnings missing estimates. It is almost always about flows. More specifically, it is about who is forced to trade, when they are forced to trade, and how much liquidity is available when they do.

That is exactly the message coming from Goldman right now. US equities have already slipped through levels that trigger selling from trend-following systematic funds, particularly CTAs. Liquidity has thinned materially. Option dealer positioning has shifted away from the long gamma cushion that had been suppressing volatility for months. Put together, that is a recipe for markets that feel jumpy, unstable, and frustrating to trade.

None of this requires a recession, a policy shock, or a macro surprise. It is structural. And this is precisely where understanding CTA behavior and tracking it properly becomes critical.

Let’s break down GS’ latest call, and tell you more about CTAs.

What Goldman is really saying

CTAs have already started selling equities because the S&P 500 broke short-term trend triggers. Based on Goldman’s estimates, those funds are likely to remain net sellers even if the market bounces. If the index falls further, additional layers of systematic selling can be unlocked. If the market goes sideways, some selling still happens. Even if stocks rally, CTAs may continue reducing exposure until their signals flip.

This is why discretionary traders often feel confused in these environments. The market can rally on good news and still fail. It can sell off without obvious headlines. Goldman also highlights two conditions that make these flows more disruptive than usual.

Liquidity is thin. Top-of-book liquidity in the S&P has collapsed compared to recent averages. When depth is shallow, price moves more for the same amount of buying or selling. Small imbalances feel big.

At the same time, option dealer positioning has flipped from long gamma to flat or short gamma. When dealers are long gamma, they tend to dampen volatility by selling into rallies and buying into selloffs. When they are short gamma, they do the opposite. They chase moves. In a thin market, that behavior exaggerates swings.

Bottom line what GS is saying is that trend-following funds are selling and dealers are no longer absorbing volatility while liquidity is poor. So chop to be expected.

What CTAs actually are

But what are CTAs? CTAs funds Model, short for “Commodity Trade Advisor” funds, represent a significant component of the financial landscape. These funds employ systematic trading strategies, primarily relying on technical & momentum analysis and price level triggers to implement trend-following strategies on the most liquid assets in the market.

That description matters because it explains why CTA flows are so powerful. These funds do not care about narratives, valuations, or earnings calls. They care about price, volatility, and trend persistence. When price crosses certain thresholds, they act. When volatility changes, they rebalance.

CTAs trade futures. That means leverage. It also means speed. When their models flip, they do not hesitate. Exposure is adjusted mechanically.

People often say CTAs are lagging. That is true in a narrow sense. They usually enter trends after they start. But that misses the point. Their size means they can still dominate flows once they are active. They can extend trends, deepen drawdowns, and create violent squeezes when positioning becomes crowded.

This is why Goldman’s clients are asking about systematic positioning. When CTAs are involved, price action stops being discretionary and starts being mechanical.

Why CTA selling creates choppy markets

Once trend signals break, many CTA models begin reducing exposure over days or weeks, not minutes. That selling does not stop just because the market bounces intraday. A strong one-day rally often changes nothing for a model that looks at 20-day or 50-day momentum.

Now put that into today’s liquidity environment. With fewer resting orders, every sell program has more impact, levels tend to break easily. Then add short gamma dealer positioning. Dealers hedging short gamma tend to reinforce whatever direction the market is moving. Down moves invite more selling. Up moves invite more buying. That does not create trends by itself, but it amplifies what is already happening.

Why tracking CTA positioning matters

We give this format for Commodities, Currencies, Equities and Indexes. This gives you a practical layout where you can see if  CTAs de-risking across assets, or just equities? Are they cutting exposure everywhere, or rotating? Those distinctions matter.

Each table shows positioning today, yesterday, and one month ago. That comparison is critical. A market can be net long and still under selling pressure if that long is being reduced. Conversely, a market can be net short but stabilizing if shorts are being covered.

Then you can watch more in depth your asset positioning by looking at the CTAs main chart: 

Understanding CTA positioning.

Conclusion

Goldman’s “buckle up” comment is not alarmist. It is structural. Trend-following funds are selling. Liquidity is thin. Dealer positioning may amplify moves rather than smooth them.

CTAs are central to this story. They are not emotional, and they are not discretionary. They follow rules. When those rules tell them to sell, they sell, often longer than most traders expect.

The MenthorQ CTAs Funds Model provides a way to track that behavior. By monitoring positioning, percentiles, z-scores, and charts, traders can understand when CTAs are adding liquidity and when they are pulling it away.

In markets driven by flow rather than fundamentals, understanding structure is the edge. When you know who is forced to trade and why, choppy price action stops feeling random and starts making sense.