Wall Street's structural pressures are intensifying as September begins. Systematic strategy positioning has approached its limit, leaving incremental buying power nearly exhausted, while a potential market downturn could unleash selling volume several times larger than any remaining bids.

According to the latest calculations from Bank of America (BofA), systematic strategies currently have only about $9 billion of buying capacity left in an upside scenario. In a flat market, they would be net sellers of roughly $1 billion. However, if the market declines, selling from CTAs (commodity trading advisors) and volatility control strategies could reach as high as $163 billion. This severely asymmetric buy-sell structure has sharply elevated risk levels for September.

Meanwhile, corporate buybacks, a critical pillar of market support, are also fading. As the buyback blackout period expands rapidly in September, machine-driven repurchase demand will shrink substantially, further undermining the market's ability to cushion any downturn. In addition, after a sell-off from Nomura strategist McElligott was cited, the current collapse in volatility has been labeled "epic," with warnings that significant trading losses might soon materialize.

Buying Power Nearing Exhaustion, Selling Risk Highly Asymmetric

Bank of America's core warning is that the problem isn't just that systematic positioning is elevated—it's that there is virtually no room left for incremental buying. According to BofA's estimates, net buying from systematic strategies would amount to only around $9 billion in an upside scenario. In a sideways market, this flips to about $1 billion of net selling. But in a downside scenario, combined liquidation from CTAs and equity volatility control strategies could total roughly $163 billion.

This highly asymmetric structure implies that upside momentum has nearly run its course. Once a decline is triggered, systematic selling could form a self-reinforcing negative feedback loop.

Volatility Control Positioning Hits The 100th Percentile

From a positioning perspective, global equity exposure within systematic strategies is currently at historical highs. Bank of America's combined estimates for CTAs, risk parity, and volatility control strategies are based on assumptions of approximately $300 billion in CTA assets under management, with roughly $200 billion each in risk parity and volatility control strategies.

Data from Deutsche Bank paints an even more striking picture: equity allocations within volatility control strategies have reached the 100th percentile—the highest level on record—leaving no room for further positioning increases.

Goldman Sachs' estimates align closely with these assessments. According to Goldman's one-month conditional forecast, incremental CTA buying in an upside scenario would be quite limited. However, in a "sharp decline" scenario, violent position unwinding would occur at both the global and S&P 500 levels. Goldman estimates current net long exposure for CTAs across global equity indices at roughly $146.5 billion, up about $2 billion from last week and sitting at the higher end of its distribution range.

Buyback Blackout Period Expands, Key Support Withdraws

Beyond systematic strategies, corporate buybacks have been another major force underpinning US equities recently. However, this support is now rapidly retreating. The market is currently near the peak of machine-driven repurchase activity, but as September's buyback blackout window quickly widens, this source of demand will diminish considerably. The blackout period typically starts about four weeks before earnings season, during which listed companies are required to suspend buyback operations.

While the blackout period itself does not constitute active selling, the withdrawal of this critical support—combined with nearly exhausted systematic buying capacity—leaves the market far more vulnerable to potential shocks. The convergence of these multiple factors makes the market's trajectory in September increasingly unpredictable.