Bullish positioning in S&P 500 and Nasdaq futures fell notably last week, with the latter witnessing a drop from a three-year high, Citi strategists said in a Monday note.
Still, Citi said the fall “in notional wasn’t as pronounced as underlying index moves would suggest.”
“S&P bullish positioning is moderate, Nasdaq levels are still extended but profit-taking risks have diminished with recent unwinds and the decrease in long position profit levels,” strategists specified.
All this occurred despite stronger-than-expected industrial production and retail sales figures, signaling that investors might have been more concerned about the rising risks from potential increases in trade restrictions with China.
On the other hand, ETF flow positioning points to growing bullish flows for the S&P and a marginal decline for Nasdaq, the bank added.
“More revealing though has been the swing in P&L levels,” Citi wrote. “Nasdaq long positions swung into losses rapidly alongside the declining index last week. However, with average position loss levels still small (-1.3%) the pressure to unwind isn’t material.”
In Europe, positioning is turning increasingly bearish. The strategists point out that levels in the Euro Stoxx 50 are the most elevated regionally. However, this is due to the unwinding of long positions rather than an increase in short bets.
Similarly, notional positioning levels for the FTSE, DAX, and Euro Banks have shifted to negative and are now mildly bearish.
Meanwhile, bullish momentum for Asia’s KOSPI remains strong as investors continue to introduce new risk flows.
Strategists said positioning is heavily skewed, similar to the Nasdaq, but the positioning profit and loss (P&L) levels are low, which limits the associated risks.
On the other hand, bullish positioning for the Hang Seng has weakened further, with net notional turning negative, mirroring the trend seen in the A50.