The recent market movements have been quite intriguing, with retail selling triggering risk control unwind. As UBS S&T observes, this is the second day of retail selling, with clients selling at a 1%-tile versus 3Y yesterday and this morning, before switching to buying. While retail investors may continue to sell more on Saturday to square their positions, they are close to a capitulation point. Systematic selling, particularly by risk control funds, will continue with large sizes tomorrow, likely exceeding $100 billion. Monday’s residual selling will depend on the rest of today and tomorrow’s moves. As UBS notes, we may not have seen the low yet, with Monday morning’s pre-open potentially marking the low, similar to August 2024 and April 2025 when Thursday-Friday selling triggered further hedge fund unwind during Asia hours when US futures liquidity was limited.

The retail-led selling has been quite significant, with UBS retail market making clients selling at a 0.5%-tile versus 3Y yesterday and this morning. This switch to buying is a positive sign, but it’s important to note that retail investors could sell more on Saturday to square their positions. As UBS notes, they are close to a capitulation point, which means they may be selling at a faster pace than usual to avoid further losses.

The systematic selling, particularly by risk control funds, will continue tomorrow with large sizes. This could exceed $100 billion, which is a significant amount of selling. It’s important to keep in mind that this selling is not just limited to retail investors but also institutional investors who are trying to reduce their exposure to risk.

Monday’s residual selling will depend on the rest of today and tomorrow’s moves. If the market continues to fall, we may see more selling on Monday. However, if the market stabilizes or rallies, we may see less selling. As UBS notes, we may not have seen the low yet, and Monday morning’s pre-open could potentially mark the low. This is similar to what we saw in August 2024 and April 2025 when Thursday-Friday selling triggered further hedge fund unwind during Asia hours when US futures liquidity was limited.

In conclusion, the recent market movements have been quite interesting, with retail selling triggering risk control unwind. While retail investors may continue to sell more on Saturday to square their positions, they are close to a capitulation point. Systematic selling, particularly by risk control funds, will continue tomorrow with large sizes. Monday’s residual selling will depend on the rest of today and tomorrow’s moves. As UBS notes, we may not have seen the low yet, and Monday morning’s pre-open could potentially mark the low.