Wall Street’s sharp rebound late last week may have offered temporary relief, but traders at Goldman Sachs are cautioning that the turbulence is far from over. After U.S. equities clawed back losses to end a volatile week on a strong note, Goldman’s trading desk warns that structural selling pressure from systematic strategies could keep markets choppy in the days ahead.

Systematic Sellers Back in Focus

The key risk, according to Goldman, lies with Commodity Trading Advisers, or CTAs — algorithmic funds that trade purely on price trends rather than fundamentals. The S&P 500 has already breached a short-term technical level that triggered CTA selling, and Goldman expects these funds to remain net sellers this week regardless of whether stocks rise, fall, or move sideways.

In a renewed downturn, the bank estimates that roughly $33 billion of U.S. equity selling could be unleashed in the near term. If weakness persists and the S&P 500 drops below the 6,707 level, that figure could swell to as much as $80 billion over the next month. Even in a flat market, CTAs are projected to sell more than $15 billion of equities, underscoring how mechanical flows can overwhelm short-term sentiment.

Panic Signals and Fragile Confidence

Investor anxiety remains elevated. Goldman’s proprietary Panic Index, which blends implied volatility, skew, and term-structure signals, recently climbed to levels just shy of “max fear.” That stress was evident earlier last week, before Friday’s rally delivered the index’s strongest one-day gain since May.

The volatility was sparked in part by renewed concerns over artificial intelligence disruption. The launch of a new automation tool by Anthropic sent shockwaves through software, financial services, and asset-management stocks, driving sharp losses in both the S&P 500 and the Nasdaq 100 as investors reassessed competitive risks.

Liquidity and Options Add Fuel

Beyond CTA flows, Goldman highlights deteriorating market liquidity as a major vulnerability. Top-of-book liquidity in the S&P 500 — the amount of shares available at the best bid and ask — has plunged to roughly $4.1 million, far below the year-to-date average near $13.7 million. With less depth, even modest orders can produce outsized price moves, delaying stabilization.

Options positioning is also working against calm trading. Dealers have shifted from a “long gamma” stance, which previously dampened volatility near record highs, to flat or short gamma. In this setup, dealers tend to buy into rallies and sell into declines, mechanically reinforcing intraday swings. Goldman’s traders summed up the environment bluntly: buckle up.

More De-Risking Potential Ahead

Other systematic strategies still have room to reduce exposure. Risk-parity and volatility-control funds remain positioned at elevated percentiles relative to recent history, meaning sustained volatility could force further de-risking. While realized volatility has risen, it has not yet reached the extremes seen late last year — suggesting another leg of adjustment is possible if choppiness persists.

Seasonality offers little comfort. February has historically been a weaker and more erratic month as supportive January inflows fade. At the same time, retail behavior appears to be shifting. After a long stretch of aggressive dip-buying, recent data show net retail selling, particularly in crypto-linked trades, hinting at waning risk appetite.

What to Watch Next

The message from Goldman is not that a collapse is imminent, but that the market’s internal plumbing is fragile. With systematic selling, thin liquidity, and options dynamics all aligned, price action is likely to remain unstable. Whether this episode evolves into a deeper correction will depend on volatility persistence and whether investors regain confidence — or step back further.