LONDON (Reuters) -The S&P 500 index's fall below a closely watched level gave hedge funds that trade stocks on trends the green light to potentially sell almost $40 billion in equities in the coming week, Goldman Sachs ( GS ) said in a note to clients seen by Reuters.

The S&P 500 declined in value past a threshold of 6,725 on Wednesday. It closed the day at 6,642.

Trend-following hedge funds were watching that threshold as a signal to either sell out of their positions, or to add short bets that stocks would fall further, the note sent to clients late on Wednesday said.

After prices fell below that figure, Goldman's calculations suggest that over the next week, $39 billion of global equities might be sold.

Should stock prices extend falls, the bank estimates that systematic trend hedge funds could sell as much as around $65 billion.

Trend-following hedge funds aim to capitalise on signals on the start of market trends - whether up or down. These signals can be based on the volume of traders in a market, the price or how fast an asset price changes during the trading day.

Before stocks began to sell off, these hedge funds were long around $150 billion worth of global equities, the Goldman note said.

The last time prices fell through one of these closely watched levels was in October, said Goldman, and prior to that, on April 2 when U.S. President Donald Trump announced a raft of tariff proposals.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Emelia Sithole-Matarise)