Strong weekly flows in S&P 500 drive extended long positioning: Citi
Investing.com — Over the past week, flows into the S&P 500 were among the largest seen this year, Citi strategists revealed Monday. Investors added nearly $23 billion in notional risk flows, pushing already high bullish levels to the 98th percentile.
The strength of these weekly flows was also clear with notional flows to the S&P nearing three-year highs. This increase lifted positioning to +4.2 on a normalized scale (out of 5), making the S&P the most bullish of the tracked indexes, according to Citi.
In contrast, the recent rise in risk flows to the Nasdaq only brought positioning to a mildly bullish +0.8, similar to levels seen in the Russell 2000.
“Positioning risk is more skewed for shorts on Nasdaq as these positions remain relatively large and are currently all in loss,” strategists said in a note.
In Europe, positioning activity was mixed, with weekly changes across indexes being relatively small. Notional positioning in the Eurostoxx rose slightly due to short covering and new risk flows, while DAX positioning also edged higher. However, positioning in the FTSE and Euro Banks remained largely unchanged.
More broadly, “there has not been any clear directional shifts in positioning in the past 2 weeks, perhaps reflecting a greater degree of uncertainty on the outlook of Europe,” Citi’s team wrote.
Meanwhile, positioning in Chinese indexes has been volatile recently. After the stimulus announcements, positioning swung from bearish to outright bullish. Still, the previous week’s surge in FTSE China A50 positions reversed last week, bringing positioning back to nearly neutral.
“Much of the bullish flows seen post the recent stimulus announcements has disappeared as investors have taken profits,” strategists explained.
Despite the rise in market volatility, short positions have remained elevated above the 70th percentile, resulting in significant losses and increasing the risk of a short squeeze.
Hang Seng positioning remained largely unchanged, Citi notes, continuing to reflect a strongly extended position.
