FWIW…

As McElligott writes in a follow-up note, he notes that Nomura’s CTA Trend model “is again deleveraging massive notional in long US Equities expressions across SPX, RTY and NDX live.”

This is more about performance and year-end timing than the curve inversion / “growth scare” story…but that certainly is not helping the sentiment here either, as stops are being triggered across fundamental and rules-based strats.

More importantly, McElligott identifies the specific deleveraging “trigger” behind the S&P waterfall liquidation, which was due to a massive CTA selling order, which was unleashed once deleveraging stops were hit in the S&P. Specifically, the SPX model was triggered to sell down at 2,763 with $32.8B notional for sale, reducing CTAs from “+100% Max Long” down to “+65% Long.”

It could get even messier if the S&P drops another 20 or so points, as the next sell point just under 2,711, where -$32.4B additional notional for sale, with “Max Short” level now lower at 2574, at which point the market would be flooded with -$122B notional in selling volume.

https://www.zerohedge.com/news/2018-12-04/here-what-triggered-todays-sudden-stock-liquidation