JPMorgan says retail traders are showing a 'major departure' in how they navigate the post-ceasefire rally

• Retail traders are "skipping the dips, selling into rallies," JPMorgan says.
• The firm says retail trading during the ceasefire marks a major deviation from typical patterns.
• Retail investors were skeptical the ceasefire would hold, a call that could pay off as markets remain on edge.

Retail traders are playing it safe, "skipping the dips, selling into rallies," marking a significant shift from the crowd's typical playbook, JPMorgan said.

The US and Iran reached a deal late Tuesday ahead of Trump's deadline for a ceasefire. What followed was what's come to be known as a classic TACO trade, but retail investors weren't buying it. In fact, they were selling.

"Retail moved from 'buying the dip' (e.g. this time last year), to now skipping the dips, selling into rallies, and positioning more defensively," JPMorgan explained,

They added that, "despite oil posting its largest decline since 2020 and VIX breaking below 20, intraday retail flows showed no signs of strengthening."

This market setup would have been attractive for retail traders last year based on past trading. eToro data shows that retail buying volumes surged as the S&P 500 bottomed and the VIX peaked following Liberation Day.

"They've been trained to buy the dip," Bret Kenwell, eToro's US investment and options analyst, told Business Insider about retail trader behavior, saying.

Yet, today retail traders are carving a new path. Unlike Liberation Day, when they bought at the bottom and continued buying as they rode subsequent TACO rallies, retail traders sold into the ceasefire rally.

JPMorgan reported that retail investors sold even broad market ETF exposure like SPY and TQQQ, which the firm called "a major departure from their typical pattern."

"Retail positioning suggested skepticism that the rally would last," JPMorgan said. They pointed to broad-market ETF purchases hitting their lowest level in a year, cutting short oil exposure through the SCO ETF, and selling sector ETFs like SOXL.

Retail investors trading around the ceasefire could play out as another instance of retail successfully navigating a volatile market like they did around Liberation Day swings.

US stocks surged on Wednesday with all three indexes more than 2% in the greenm while oil prices plunged, but cracks in what US Vice President JD Vance called the "fragile truce" have emerged.

By Thursday, market pricing was catching on to what former PIMCO CIO Mohamed El-Erian described as the deal's "fragility."

The S&P 500 and the Dow Jones Industrial Average opened Thursday's session in the red and oil was inching back toward $100 per barrel.

Iranian parliament speaker, Mohammad Bagher Ghalibaf, said three points of the agreement that he says have been violated, with Israel's continued bombing of Lebanon being a key point.

"Ceasefires are always messy," Vance told reporters in response to Ghalibaf's comments.