SINGAPORE (Reuters) - After a turbulent week in global markets, the worst of the selloff might be over but investors need to "keep the reins tight on big directional bets for now," Goldman Sachs global head of hedge fund coverage Tony Pasquariello said.

In a client note issued on Wednesday seen by Reuters, Pasquariello called the week's moves in the market since Friday "a global margin call" and laid out where the markets are possibly headed from here.

WHY IT'S IMPORTANT

Investors are struggling to figure out if the wide stock market meltdown stoked by weak U.S. recession worries and an unwinding of yen-funded carry trades is over.

They are also adjusting to uncertainties around imminent Federal Reserve rate cuts and U.S. elections in November.

CONTEXT

The rout this week stunned markets with the S&P 500 down nearly 6% in just five trading days in August, while Japan's Nikkei has fallen 10% in the month. The yen has soared 10% from 38-year lows in a month.

Goldman said the entire trading community may not be fully cleansed of risk, with its franchise flows and prime brokerage data not revealing a ton of selling, although the moves have the markings of significant risk transfer.

QUOTES

Pasquariello: "I find it hard to stake a major claim on the risk/reward profile of S&P right here, so I would keep the reins tight on big directional bets for now and look to make your money in the seams of the market."

"The worst of the forced de-risking is behind us, but I think the skew is towards ongoing selling by the trading community."  

"Both commodity trading advisers (CTAs) and vol-control funds will likely remain in sell mode for a bit longer ... I suspect the retail community will lack confidence until the upside trend is clearly reestablished."