Summary in one sentence: Short squeeze, seasonal factors, bottoming sentiment, pension rebalancing, continued retail buying, and cash waiting to be deployed may drive a rebound.

As of March 20, data from Goldman Sachs trading desk:

The net leverage ratio of US hedge funds (gray line in the above chart) has sharply dropped to a two-year low of 75.8%;

However, the total leverage ratio (blue line in the above chart) remains high at 289.4%, the highest level in five years, clearly due to the rise in short positions;

The above chart shows that the total leverage ratio of funds in the US increased significantly by 2.5% in March, while deleveraging occurred in other parts of the world;

The long/short (market cap weighted) ratio has dropped to its lowest level in over five years at 1.64;

For the first time in a year and a half, CTA funds have net shorted US stocks;

The above indicates that high leverage has decreased somewhat, but there is still room for deleveraging before tariffs are implemented, and we are close to a reversal.

The rise in total leverage is due to an increase in leveraged shorts, which could be a good thing. The data shows that hedge funds are reluctant to significantly reduce their long positions, instead relying on external financing for leveraged short hedges. When the market experiences abnormal volatility, the financing party may issue a margin call, forcing shorts to cover or sell other assets to meet margin requirements, which greatly increases the probability of a short squeeze. If funds choose the latter, i.e., selling other assets, it could amplify the market's abnormal volatility.

However, note that this does not imply a guaranteed rise, but rather that if there is an increase, a short squeeze could provide support.

Market sentiment has fallen to a low point, and the market has returned to an environment where "good news is good news," with sentiment possibly warming up:

Seasonal bearish trends are nearing their end:

According to data since 1928, the second half of March typically experiences significant volatility, and this year is no exception.

However, the S&P 500 index has averaged a 0.92% increase from March 20 to April 15, and an average increase of 1.1% from the end of March to April 15.

This suggests that April may have the potential for a seasonal rebound, but the magnitude is limited. After April 2, if there are no major unexpected events, the market may stabilize.

US pensions are expected to buy $29 billion in US stocks at the end of the quarter, ranking at the 89th percentile of absolute value estimates over the past three years and the 91st percentile since January 2000. This move may provide some support to the market:

Despite market volatility, retail investor participation remains stable, with retail investors only net selling on seven trading days since 2025, accumulating a net buying amount of $15.6 trillion.

Additionally, the asset size of money market funds (MMFs) continues to grow, reaching $8.4 trillion in the US. These funds represent cash reserves for retail and other investors, and once market sentiment improves or investment opportunities arise, this capital may quickly convert into buying power in the stock market.

Market liquidity remains thin, which is why there are often significant intraday fluctuations, so caution is advised regarding risks:

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