Citi strategists said US equity futures experienced a notable shift towards bullish sentiment last week, with investors adding $18 billion in new long positions in S&P 500 futures.
“The S&P futures had the largest build-up of open interest outside of roll periods since October as Wednesday and Friday saw large new long positions established,” they wrote.
Similarly, Nasdaq 100 futures saw an influx of $7.4 billion in new long positions. According to analysts, the positioning on the tech-heavy benchmark is “very extended and completely one-sided.”
Conversely, exchange-traded funds (ETFs) experienced only modest net inflows.
Specifically, for the S&P, short positions amounting to nearly $30 billion are currently at a loss, having an average entry price of 4811. As such, short sellers may be pressured to cover, analysts add.
Elsewhere, investors are reducing their gross exposure in Europe, pulling back from both long and short positions.
“Like the US, 100% of the short positions are out of the money (SX5E), indicating there is a potential for covering if the market can maintain these levels or higher,” strategists noted.
Pessimistic bets on Chinese stocks, in the meantime, are slowly being reversed, particularly in A-shares, where the market stance is approaching a neutral position. On the other hand, Hang Seng futures still show a significant net short presence.
“In line with the US, ASX 200 has recent strong bullish momentum and net positioning is now the most extended net long market that we cover,” the team said.