As markets await potential negotiations out of the Middle East, risk off sentiment prevails, with approximately 70% of the S&P 500 (SPX) in the red. The price of oil has reached local highs once again ($110), and the CBOE Volatility Index (VIX) is nearing 30. Many themes are weak, including Bitcoin Sensitive (GSCBBTC1 Index) down 6%, High Retail Sentiment (GSCBHRSB Index) down 3.4%, and Liquid Most Short (GSXUMSAL Index) down 2.9%. Meanwhile, Momentum (GSPRHIMO Index) is seeing a rebound of 2.4% after yesterday’s weakness.

Yesterday’s selloff in High Beta Momentum (GSPRHIMO) was the largest down day for the factor since February’s momo unwind, driven by weakness in the long leg (GSXUHMOM) and one of the four largest moves lower for the factor in the past three years.

Software (GSTMTSFT) is down 3.7% after a blog post called Anthropic’s new model Mythos “ahead of any other AI model in cyber capabilities.” Cybersecurity names are trading down as a result, with CRWD down 6.3%, PANW down 6.6%, NET down 4.4%, and ZS down 5.6%. The desk has seen HF shorting in these names today.

CTAs have largely been better sellers, selling approximately $55 billion of US equities since the start of the month, leaving them short approximately $18.5 billion of the asset class. Looking forward, in an up tape, we estimate CTAs will buy $86 billion of US equities over the next month, which sits in the 99th percentile on a one-year lookback.

A cocktail of tough technicals persists, with the S&P Top of Book remaining low at $8.9 million (1-year avg of $11.55 million), ETF percentage of the tape remaining elevated at 40%, and S&P volumes remaining light, down 12% vs the 20-day average.

Our flows indicate that we are currently a 5 out of 10 in terms of overall activity levels, with LOs skewed 10% better to buy and demand in energy, utilities, and materials. HFs are skewed 3% better for sale with supply in macro products, energy, and utilities.

In today’s Chart of the Day, we highlight that with the SPX through all its major moving averages and down approximately 8% YTD, 6300 (-10% correction zone) is the next level to watch.