Investors continue to add more risk to U.S. equities, according to Citi strategists. Last week, during which the S&P 500 added 0.3%, bullish flows increased.
Nasdaq positioning is now at 3-year highs with “elevated” profit levels, the strategists note. Tech stocks are surging amid AI-linked frenzy with Nasdaq hitting 13-month highs yesterday.
“Both S&P and Nasdaq futures positioning are currently extended long with positioning risk more extreme for Nasdaq, which is also near one-sided. Average long positioning profits are over 8% for Nasdaq,” the strategists said in a client note.
Hence, they believe the position risks are “very much biased towards profit taking, which could create a headwind against the on-going rally.”
In Europe, the positioning is more neutral, except for the UK’s FTSE index, where short positioning is extended.