US equities witnessed a pullback last week, halting the strong upward trend that had been evident since the beginning of January. However, futures positioned remained “near unchanged for S&P and Nasdaq” during the week, Citigroup analysts said in a Tuesday note.
“Positioning activity was predominantly led by long and short covering offsetting one another. As a consequence, S&P and Nasdaq continue to remain bullish and extended, and little changed from the week before,” they wrote.
Meanwhile, profit/loss levels have narrowed as recent long positions have incurred losses due to falling prices, thereby diminishing the overall risk of profit or loss linked to current market positions.
Elsewhere, bullish positioning in Europe continued to grow last week, with the majority of flows being directed toward Euro Stoxx 50 and DAX futures.
“Positioning on DAX is currently at 3-year highs with EuroStoxx marginally lower,” the analysts noted.
The increasing profit levels within the Euro Stoxx 50 are causing concern, leading to heightened risks of profit-taking and potentially acting as a short-term obstacle to further gains, the strategists added.
Similar to EuroStoxx, recent weeks have seen a steadfastly bullish stance on Japan’s Nikkei, where increasing profit levels are resulting in higher profit and loss risks.
Over the last month, there has also been a noticeable shift in positioning trends for China A and Hang Seng futures, with both experiencing a rise in notional positioning.
“China A is now neutral, with net notional turning positive for the first time since November. Hang Seng bearish levels are falling, but positioning here is still extended short,” the analysts said.