Turbulence Ahead: CTAs Signal Unwinding Cascade

A Commodity Trading Advisor (CTA) model I follow indicates that trend follower longs in the NASDAQ-100 and S&P 500 are at stretched levels, leading to significant declines in the benchmark CTA index. Specifically, the stop-loss trigger for the NASDAQ-100 was activated mid-week, while the S&P 500’s trigger was hit on Friday. This suggests that the NASDAQ-100 has already experienced substantial CTA unwinding, while the S&P 500 may see further unwinding if the trend continues. For small caps, trend followers are accumulating Russell 2000 longs due to a rapidly increasing price trend.