The average stock is now down 30% from its 52-week high, marking a brutal stretch for equities as hedge funds scramble to de-risk. Liquidity is vanishing, with Goldman Sachs reporting a 65% drop in top-of-book liquidity - a measure of trading volume - making it increasingly difficult for large trades to execute. This is fueling wild swings in stock prices and amplifying downside risks. Meanwhile, hedge funds are still heavily leveraged, with gross exposure sitting at historically elevated levels. Despite aggressive selling, leverage remains sticky, suggesting further unwinding could be ahead.
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We called the market top spot on in our February 23rd issue and its been downhill from there. The good news is the market was overvalued and there are starting to be real bargains for longer term investors.
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On the technical front, the S&P 500 just suffered one of the fastest reversals from overbought to extreme oversold in just eight trading days. Sentiment indicators remain mixed. While the RSI suggests a potential buying opportunity, investor positioning still leans defensive. With seasonal trends signaling potential market lows, traders are eyeing March 14th as a possible inflection point. However, without a clear macro catalyst, the risk of prolonged selling remains high.

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