Last week's summary from Goldman Sachs Prime Brokerage trading desk on U.S. stocks: 1. Last week saw the largest hedge fund deleveraging in over three years + the biggest net buying from short covering since November 2020. 2. In the same week, we witnessed one of the largest single-day market cap increases and decreases in history (MSFT and AAPL), yet the S&P 500 moved less than 1% for the week. The current market theme is focused on individual stocks. 3. Mag7 allocations remain at low levels. Mag7 accounts for about 16% of GS Prime clients' total U.S. equity net exposure, sitting at the 12th percentile over the past year and the 22nd percentile over the past three years. Institutional allocations are still light. (That's why there was a rush to buy after MSFT and AMZN earnings reports.) 4. The short-term CTA trend signal for the S&P 500 turns negative at 7445, the medium-term trend level is at 7215, while the long-term signal remains positive. CTAs are estimated to still hold close to $115 billion in net long positions. If global equities drop another 1 to 2.5 standard deviations, cumulative selling of $60–170 billion could occur within a month. Conversely, if the market continues to rise, CTAs could add $40–50 billion in buying over the next month. (Watch out for imbalanced buying and selling; breaking below 7445 could be risky.) The 7445 level on the S&P can be seen as the short-term dividing line between bullish and bearish sentiment. As long as the market holds this level, position recovery and incremental CTA buying could continue. However, if it breaks below this level accompanied by increased volatility, the market may test the medium-term trend area around 7215 again. Baseline scenario for next week: CTA neutral, U.S. stocks may see another $5 billion in selling. 5. Despite the recent semiconductor sell-off, ETF funds are buying the dip. The two major semiconductor ETFs, SMH and SOXX, saw approximately $13 billion in net inflows in July, marking the strongest monthly inflow since SMH was established. This could provide medium-term support for the semiconductor sector, but it doesn't guarantee an immediate short-term bottom. Continued inflows and further declines can coexist. 6. The most intense deleveraging phase in U.S. stocks may be over, and the market is entering a period of consolidation and recovery. AI remains the main theme, but funds will increasingly focus on cloud computing leaders and AI hardware with real profitability. The market is likely to shift from broad-based gains to sharp differentiation. Key areas to watch: GS thematic basket team favors: U.S. data centers / European semiconductors & general AI / Asian AI bottlenecks Most inquired by GS trading desk clients: Storage (WDC/STX), Analog Chips (ADI/TXN), MSFT/AMZN