After a big dump in the US stock market, reversal signals are gradually emerging.

In summary: short squeeze, seasonal factors, sentiment at bottom, pension fund rebalancing, retail investors continuing to buy, cash waiting to be deployed may drive a rebound.

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

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

However, the overall leverage ratio (the blue line in the above chart) has reached 289.4%, the highest level in five years, which is clearly due to the rise of short sellers.

The above chart shows that the total leverage ratio of funds in the United States increased significantly by 2.5% in March, while there was deleveraging 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;

CTA funds have net shorted U.S. stocks for the first time in a year and a half.

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

The rise in the total leverage ratio is due to an increase in leveraged short positions, which could be a good thing. Data shows that hedge funds are reluctant to excessively cut long positions and instead rely on externally financed leveraged short hedging. When there are abnormal fluctuations in the market, the financing party may issue a margin call, forcing short positions to close out or sell other assets to cover margins, which greatly increases the probability of a short squeeze. If funds choose the latter, which is to sell other assets, it could amplify the market’s abnormal fluctuations.

But note that this does not mean a certain rise, but rather that if there is an increase, it will be boosted by a short squeeze.

Market sentiment has fallen to rock bottom, and the market has returned to an environment where “good news is good news”. There may be a possibility of sentiment rebounding.

The seasonal bearish trend is coming to an end:

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

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

This indicates that there may be potential for a seasonal Rebound in April, but the magnitude is limited. After April 2nd, if there are no major unexpected events, the market may stabilize.

U.S. pensions are expected to buy $29 billion in U.S. stocks by 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, the participation rate of retail investors has remained stable, with only seven trading days so far in 2025, with cumulative net purchases reaching $1.56 trillion.

In addition, the asset size of money market funds (MMFs) continues to grow, reaching $8.4 trillion in the United States. These funds represent the cash reserves of retail investors and other investors, which could quickly be converted into buying power in the stock market once market sentiment improves or investment opportunities arise.

Market liquidity is still thin, which is also why there are often large fluctuations during the day, so be mindful of the risks: