Institutional selling is driving the equity market lower at the start of the week, with sharp declines in futures and cash markets. According to a recent note from MS PB Content, institutions are leading the sell-off, with the 13th percentile for this time of day in terms of selling pressure. Meanwhile, retail buying remains muted, with net demand in the 65th percentile for this time of day but only accounting for a small portion of total cash volume.

The low starting levels of volatility and the street’s short downside vega positioning are contributing to the reactivity of volatility in today’s market. The selloff is concentrated, with only four stocks underperforming the S&P 500 today, and dealers are benefiting from longer gamma in a selloff. However, the relatively low levels of retail buying suggest that there may be limited support for the market in today’s trading.

It is worth noting that US L/S HFs came into the day with grosses at historical highs of 218%, which could potentially contribute to the selloff. Additionally, the degrossing that is occurring alongside the selloff could also impact market dynamics.

Overall, while dealers may benefit from longer gamma in a selloff, the lack of retail buying support and the concentrated nature of the selloff suggest that the market may struggle to find firm footing in today’s trading. As such, it will be important to monitor developments in the equity market closely in the coming days to see if this trend continues or reverses.