As Stocks Slump, Nomura Exposes What Levels Will ‘Trigger’ CTAs

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As Stocks Slump, Nomura Exposes What Levels Will ‘Trigger’ CTAs

With Quad Witch behind us and China’s Golden Week upon us, the regularly-scheduled “global growth scare” has taken front-page headlines (for now) and is sparking equity derisking as safe-haven flows have sent gold and bond (prices) higher.

And, as Nomura’s Charlie McElligott notes, while the ugly ISM miss was the short-term macro-catalyst, US equity markets are now testing levels where more technical forced selling will exaggerate the markets’ volatility.

1) A now much deeper and more sizeable “Short $Gamma” position for Dealers in both SPX (flipped “short” under 2978, with combined $Gamma of SPX / SPY at -$7.1B, just 11.7th %ile back to 2013) and Nasdaq (“flipped” short under 190.63, with $Gamma in QQQ of -$317.3mm, just 7.8th %ile since 2013)

 As Stocks Slump, Nomura Exposes What Levels Will 'Trigger' CTAs

2) We now see net “Negative $Delta” in index / ETF options now significant as well, with SPX / SPY at -$103.9B (15.6th %ile, flipped “negative” below 2962) and QQQ at -$7.4B (8.0th %ile, flipped “negative” below 191.45)

As Stocks Slump, Nomura Exposes What Levels Will 'Trigger' CTAs

3) The final “escalation flow” comes from CTA Trend “triggers” being hit, as the Nomura CTA model estimates that both the S&P- and Nasdaq- futures positions would be DELEVERAGING / REDUCING from the prior “+100% Long” to now a “+54%” signal (the 3m window “flipped” short for both), with S&P selling on the closes below 2960 and Nasdaq selling below 7778 yesterday, which is likely some of the flow we seen going through the market now during the overnight / early hours session

Fleshing out CTA positioning in Global Equities futures and further triggers from here:

  • SPX position would turn outright SHORT on a break lower and close below 2903 – yet would re-leverage back to “+100% Long” on a close above 2972

  • For Nasdaq, the position would turn outright SHORT on a break lower and close below 7569 – yet would re-leverage back to “+100% Long” on a close above 7825

As Stocks Slump, Nomura Exposes What Levels Will 'Trigger' CTAs

And across other asset classes…

As Stocks Slump, Nomura Exposes What Levels Will 'Trigger' CTAs

Trade accordingly.


Tyler Durden

Wed, 10/02/2019 – 09:35

As Stocks Slump, Nomura Exposes What Levels Will 'Trigger' CTAs

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