(Bloomberg) -- Traders should watch for stock market weakness later this summer as positioning in US equities reaches its limit, according to Scott Rubner, global markets division managing director and tactical specialist at Goldman Sachs Group Inc. 

The S&P 500 Index is up 14% in 2024, the best start to any election year on record, Rubner wrote in a note to clients. However, market positioning is sending some troubling signals for share prices, so Rubner is “modeling a late summer correction,” he wrote.

“I don’t think that investors are positioned for a further move higher in stocks and this would be a pain trade,” Rubner wrote.

The S&P 500 is currently trading above 5,400, and while active investors keep buying stocks, Goldman’s models show that positioning among commodity trading advisers, or CTAs, is full. CTAs have the index’s short-term threshold at 5,243, its medium-term threshold at 5,037, and its long-term at 4,701, according to Goldman’s calculations. That means if the S&P 500 reaches those levels, CTAs will become sellers. 

Despite strong gains in stock prices, seasonality can also work against the market. Since 1928, the first 15 days of July have been the best two-week trading period of the year for equities. But July 17 has marked the local top for the month heading into a materially lower August. On top of that, equities also tend to face risks of outflows ahead of presidential elections, Rubner added. 

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