(Bloomberg) -- The stock market is becoming more prone to a swift pullback as opposed to keep climbing at this stage, with rules-based traders boosting their equity exposure to the top of a historic range, according to Goldman Sachs Group Inc.’s Scott Rubner.

While the S&P 500’s next 50-point move could be higher around any favorable headlines out of US debt-ceiling negotiations, the next 100-point move will likely be lower, said Rubner, a managing director at Goldman who has studied flow of funds for two decades. 

“I am calling the set up right here for global equities: ‘escalator up, elevator down,’” Rubner wrote in a note. “The pain trade remains upside on a headline/‘Deal’ led by low quality themes, and then a market correction.” 

Should that prediction come true, it would not be welcome news for hedge funds, which according to Wall Street’s major prime brokerages have just warmed up to stocks after shunning them for the large part of the past year.

Rubner’s recent forecasts have proved prescient. At the end of March when the market was mired in a banking turmoil, he called for more equity gains at least in April, citing bearish positioning among hedge funds and retail investors. The S&P 500 ended April with a 1.5% advance. 

One month later, the market veteran turned cautious, saying rules-based investors such as commodity trading advisers — CTAs that surf the momentum of asset prices through long and short bets in the futures market — were running “out of ammo” after raising their equity holdings at a fast clip. Now, the equity benchmark is set for its second monthly decline this year.

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In a market where stocks are largely stuck in a trading range, analysis on money flows such as Rubner’s has gained traction as investors struggle to get a firm grip on the path of the economy and monetary policy.

To be sure, big systematic traders are only one force in the market. Tracking and predicting their impact on supply and demand dynamics is fertile ground for Wall Street analysis, but is by its nature an imprecise science.  

By Rubner’s estimate, equity exposure among CTAs has increased to levels not seen since early 2022. Over the next week, a down market would prompt the group to sell $28 billion of global stocks. On the other hand, an up market would lead to share buying, albeit on a smaller scale of roughly $10 billion. 

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Stocks fell for a second session after the S&P 500 climbed to a nine-month high and failed to sustain above the widely watched 4,200 level. Since reaching the bear-market low in October, the index has mostly been trapped in a 450-point band. The gauge dropped 0.7% on Wednesday. 

Adding to the murky outlook is the impasse over raising US debt ceiling. While stocks climbed last week, bolstered by news around the progress toward a deal, skeptics warned that a deluge of Treasury-bill sales could drain liquidity from the banking sector, raise short-term funding rates and hurt the economy. 

(Updates trading.)

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