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As concerns about weakness in the semiconductor sector grow, hedge funds have continued to sell chip stocks and tech overall for most of the last month.
Goldman’s Prime brokerage said Info Tech (NYSEARCA:XLK) was the most net sold sector last week, driven by short and long sales. Info Tech has been net sold in four of the last five weeks.
“Most subsectors were net sold on the week, led in notional terms by Semis & Semi Equip (SOXX) (NASDAQ:SMH) (long sales), Tech Hardware (short sales), and Communications Equipment (long + short sales), which outweighed net buying in Software and IT Services,” Goldman said.
“Info Tech is still among the most notionally net bought US sectors on the Prime book YTD.”
“Semis & Semi Equip now makes up 4.3% of Overall US Net Exposure on our Prime book (down from a 5-year high of 5.8% at the start of June), which is in the 86th percentile vs. the past year and in the 97th percentile vs. the past five years,” Goldman added.
While selling tech, appetite grew for Financials (XLF), with those stocks net bought for the second-straight week and at the fastest pace since December. That was driven by long buying and short covering “to a lesser extent.”
“Nearly all subsectors (sans Consumer Finance) were net bought, led by Capital Markets (long buys), Banks (short covers), and Insurance (long buys + short covers).”
No matter how the market trades this week, though, CTAs are likely to be sellers according to flow data.
Goldman derivatives and flows specialist Cullen Morgan says in the flat tame there is $15B poised to sell, with $622M in the S&P (SPY) (IVV) (VOO).
There is $3B to sell in an up tape (-$1.6B in the S&P) and $36B to sell in a down tape (-$2.8B in the S&P).