Cullen Morgan, Goldman Sachs’ top derivatives and flow specialist, signaled a warning on August 3 that the current market rally might be masking serious selling activity. His analysis shows that while headline numbers suggest gains, the actual trading flows reveal more selling than buying. Morgan explains that net flows the difference between buying and selling can appear positive even when gross selling is very high, indicating significant distribution happening quietly.
Morgan’s track record involves tracking systematic funds like Commodity Trading Advisors, which rely on momentum and trend signals across markets. He noted that these funds’ long equity exposure recently hit the 94th percentile, with potential sales ranging from $1.2 billion to $32 billion depending on market conditions. This implies that if trends shift, these algorithm-driven sellers could trigger a sharp reversal.
He also highlighted unprecedented weekly patterns in the S&P 500, where underlying risks don’t align with the seemingly strong market performance. This disconnect is important because investors tend to focus on net returns without realizing the heavy gross selling that can undermine the rally.
Although Morgan’s note didn’t mention cryptocurrencies directly, the crypto market’s growing correlation with equities means these signals matter there too. Systematic funds that manage cross-asset momentum won’t hesitate to sell liquid assets like Bitcoin if market sentiment sours. This dynamic could add pressure to digital assets even if crypto-specific news remains neutral.
For those watching both stocks and crypto, Morgan’s insight serves as a reminder that calm markets on the surface may hide stormy flows underneath.
This material is for informational purposes and does not constitute financial advice.
