Retail investors have already shown a "surrender" signal, Citadel: This may indicate that the US stock market will usher in a phase of rebound.

Against the backdrop of increased market volatility and escalating geopolitical risks, retail investors' sentiment has shown a significant weakening. Strategists at Citadel Securities believe that this change may indicate a rebound opportunity for U.S. stocks in the short term. According to data from the firm, retail investors, known for "buying on dips," shifted to net selling of U.S. stocks and options on their platform last week, marking a rare phenomenon that has only occurred 18 times since January 2020. This shift occurred after continuous market fluctuations and was mainly influenced by the surge in oil prices and escalation of conflict in the Middle East. Scott Rubner, head of stock and derivatives strategies at Citadel Securities, pointed out that there are signs of "early surrender" from retail investors in both the spot and options markets, indicating that retail investors are no longer the one-sided buyers in the market. Although this shift signifies a short-term shift towards pessimism, historical experience shows that similar stages often correspond to stronger subsequent market performance. Data shows that after similar signals in the past, the S&P 500 index saw an increase about 82% of the time within two months, with an average increase of about 4.1%. In terms of fund flows, retail investors were still net buyers in March overall, but their participation significantly decreased. Data shows that the net buying intensity in March decreased by about 55% compared to the previous month, and dropped by about 70% from the peak in January. This change is closely related to the market environment. The S&P 500 index fell by about 5% in March, while the surge in energy prices further intensified concerns about inflation. Brent crude oil has risen by about 80% since the beginning of the year, exerting continued pressure on risk assets. At the same time, retail investors' behavior in the options market is becoming more defensive. While overall trading volume remains high, fund flows are starting to shift towards selling and increasing hedging demand for downward risks. Data shows that retail investors' options trading is showing a noticeable bearish trend for the first time since November last year. Institutional investors are also increasing defensive positioning, but the adjustments started early. Rubner pointed out that some systematic strategies still have positions lower than the reasonable level corresponding to volatility, and once the market stabilizes, new incremental buying may emerge. Additionally, there are signs of long-term fund inflows, especially in the large-cap tech sector, as some investors begin to reposition through options strategies, indicating a partial recovery of the "buy on dips" sentiment. From a seasonal perspective, April is usually a stage for market style changes. As the impact of tax-related fund flows weakens, market focus will gradually shift towards second-quarter earnings reports and potential IPO activities, which may provide new support for the stock market.