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Investing.com -- The Nasdaq 100 would need to fall below 23,900 points to trigger selling from trend-following funds, according to UBS strategists.
In a note led by Nicolas Le Roux, UBS pointed out that Commodity Trading Advisors (CTAs) are currently "max long the Nasdaq," but a "decent selloff" would be required to change their positioning.
The tech-heavy index closed at a record 25,821.5 points on Monday.
The strategists observed that investors are showing caution about high earnings expectations for technology companies. This has led to increased purchases of short-term gamma on the Nasdaq 100.
The analysis also covered European markets, noting that CTAs maintain maximum long positions in the Euro Stoxx 50 despite weak economic data and political uncertainty in France.
The European benchmark would need to drop to 5,450 from Tuesday’s all-time closing high of 5,711 to prompt these funds to unwind their positions.
Options delta hedging and CTAs can amplify market price movements, but UBS suggests a major shift from the current bullish trend would be necessary to alter their market stance.
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