Goldman Sachs “Flow of Funds: Flash Update” frames the week’s tape as mechanically driven and structurally choppier, with systematic selling pressure becoming the central risk if key index trigger levels are breached. CTAs are highlighted as the most immediate swing factor: positioning remains elevated on a multi-year basis, they have already sold roughly $6.25bn of US equities year-to-date, and GS estimates meaningful additional supply could be unlocked over the next month if the S&P 500 breaks the medium‑term threshold around 6707, with up to roughly $80bn of incremental selling potential tied to that move.

Market microstructure has deteriorated quickly, amplifying intraday volatility. S&P top-of-book liquidity is cited as sharply lower versus the year-to-date average, and dealer positioning has flipped from a stabilizing long-gamma regime into a flat-to-short gamma setup near spot. In practical terms, GS expects dealers to be longer gamma on rallies and shorter on selloffs, which—combined with thinner liquidity—can widen and accelerate moves in both directions and delay stabilization.

Beyond CTAs, GS flags other systematic cohorts as having room to sell if volatility stays elevated. Risk parity and volatility control positioning are both described as high on a 1-year lookback, with the caveat that these strategies respond on slower horizons than CTAs, making them more relevant if volatility becomes sustained rather than event-driven.

On positioning and breadth, prime brokerage analytics suggest hedge fund exposures are “getting cleaner” but still vulnerable, with a recent session characterized as unusually broad-based pain across equity strategies. Breadth has weakened, but GS does not characterize current breadth readings as outright alarming yet; it is positioned as a monitoring variable for signs of a larger regime shift.

GS also points to February seasonality as a headwind, arguing that supportive January-type flows fade and can leave a weaker, choppier mid-month profile—often with intermittent relief rallies. Retail is described as less consistent in "buying all dips" versus last year, with crypto and crypto-linked drawdowns noted as a potential sentiment and flow drag if they spill over into a broader US equity rotation.

Finally, the desk underscores the market’s increasing thematic/ETF expression—ETFs approaching a large share of tape—and notes sharp recent underperformance in momentum exposures. In volatility markets, front-end SPX skew is described as aggressively bid as investors roll and monetize hedges, and GS suggests trading conditions remain challenged until risk premium is eventually taken out, potentially after an event-driven VIX spike that can set the stage for a relief rally