US equity markets are facing a fresh source of pressure as traders at Goldman Sachs warn that large trend-following funds are shifting into sell mode, potentially amplifying downside moves through February 2026.
Key Takeaways
Goldman Sachs says CTA funds have triggered sell signals, putting mechanical selling pressure on US stocks through February.
Despite short-term risk, Goldman still expects the S&P 500 to end 2026 higher, with volatility likely in the meantime.
According to the bank’s trading desk, systematic strategies run by Commodity Trading Advisers (CTAs) have already triggered sell signals. Even after a sharp rebound on February 6, when the S&P 500 jumped nearly 2%, Goldman says these funds are likely to remain net sellers in the coming sessions regardless of market direction.
Systematic funds turn into forced sellers
Goldman’s analysis suggests that CTA positioning has flipped decisively. Once these trend-following models activate, they tend to execute mechanically, adding selling pressure even during short-term rallies. This dynamic raises the risk that any rebound could be met with renewed supply rather than fresh buying interest.
Market performance over the first week of February has already been uneven. While the Dow Jones has managed to stay marginally positive, the S&P 500 has slipped into negative territory for the year, and the Nasdaq has seen sharper declines.
Billions in potential equity outflows
The scale of possible selling is significant. Goldman estimates that a renewed downside move could trigger roughly $33 billion in equity sales in the near term. If the S&P 500 were to fall below the 6,700 area, cumulative systematic selling could rise toward $80 billion over the next month.
Even without a clear selloff, the pressure does not disappear. Goldman’s models indicate that CTAs could still offload more than $15 billion in a flat market, or close to $9 billion even if stocks grind higher, as positions are recalibrated.
Thin liquidity and technical stress add fuel
The broader market setup is making these flows more dangerous. Liquidity has been relatively thin, while dealers are positioned “short gamma,” a condition that tends to exaggerate price swings in both directions. At the same time, Goldman’s Panic Index recently climbed to levels associated with near-maximum fear, reflecting elevated volatility and defensive options positioning.
Losses in megacap technology have added to the unease. In late January, Microsoft alone lost roughly $350 billion in market value, highlighting how quickly sentiment has shifted after a strong start to the year.
Short-term risk versus longer-term optimism
Despite the near-term technical pressure, Goldman’s broader outlook for 2026 remains constructive. The bank continues to forecast the S&P 500 ending the year around 7,600, implying solid upside from current levels. Expected support includes seasonal inflows from tax refunds and continued productivity gains linked to artificial intelligence.
Still, risks remain elevated. Uncertainty surrounding leadership changes at the Federal Reserve as Chair Jerome Powell’s term ends in May, along with potential shocks from interest rates or trade developments, could easily disrupt that optimistic trajectory.
For now, markets are entering a critical window where systematic selling may dominate price action, leaving investors watching closely to see whether February’s volatility escalates or stabilizes.
