Goldman Sachs warns of new pressure on the stock market as algorithm fund sell-offs accelerate

Goldman Sachs’s trading division has indicated that a major market turning point is approaching. The stock market, which temporarily recovered from a sharp decline last Friday due to a rebound, is expected to face increased selling pressure this week from trend-following algorithmic funds.

Breakthrough of the S&P 500 Triggers Algorithmic Selling

The S&P 500 index broke below a short-term support level, activating sell switches among commodity trading advisors (CTAs). According to Goldman Sachs analysis, systematic strategies that automatically track market trends are likely to continue mechanical selling regardless of fundamental factors. There is concern that these algorithmic funds will respond to downward price trends, creating a vicious cycle that further amplifies selling pressure.

Predicted Selling Volumes Vary Across Multiple Scenarios

Goldman Sachs’s forecasts suggest that the amount of selling could vary significantly depending on market developments.

Scenario where the stock market declines again: Approximately $33 billion in sales are expected just this week. In a more severe case, if the S&P 500 drops below 6,707 points, systematic selling could reach up to $80 billion over the next month.

Scenario where the market stabilizes: Even in a stable market environment, CTAs are projected to execute about $15.4 billion in U.S. stock sales this week.

Scenario where the stock market rises: Although it may seem counterintuitive, even if the market enters an upward phase, these algorithmic funds are forecasted to continue selling about $8.7 billion.

Indicators Investors Should Watch

What is clear from Goldman Sachs’s warning is that the current market may be heavily influenced more by automated selling systems than by fundamental factors. Investors need to pay close attention to the movements of the S&P 500 and changes in CTA positions this week. Maintaining vigilance among market participants is essential to prevent a chain reaction of mechanical selling by algorithmic funds that could push prices even lower.