...(as explained in "Coronavirus Has The Potential Coronavirus Has The Potential To Trigger A Global DepressionTo Trigger A Global Depression"), today's sharp market drop, which pushed the Dow Jones back in the red for the year, is having adverse consequences for market positioning.

Starting with CTAs (which as we explained earlier this week, have emerged as the dominant price-setter in this momentum-driven market), Nomura's Masanari Takada writes that they have finally emerged as sellers of equity futures as a result of the recent spike in VIX, to wit: "with market volatility on the rise, CTAs appear to be closing out the overlarge long positions they had accumulated in US equity futures. At current price levels, however, we think most of this is defensive unwinding, as we estimate that their recent long positions in S&P 500 futures (net buying since December 2019) break even around 3,270." And with the S&P at 3245 currently, every CTA that bought in the past month is now underwater.

The good news is that CTA liquidation of long positions has been stop-and-go, as even below 3,270, bottom-up buying pressure from Long/Short funds and other bullish investors generally keeps the bottom from dropping out.