Written by Sinad Karahimetovic
Chris Montagu, global head of quantitative research at Citi, has noted a bearish situation picking up across markets, but still short of reaching extreme net selling levels.
Last week, US and other US indices fell sharply in response to higher yields that persisted in price under very tight tightening by the Federal Reserve. Montagu noted that new short positions are increasing rapidly.
“Continuing this could result in a very one-sided skew,” the strategist warned clients on a note.
“Significant shifts in positions are starting to appear across S&P 500 futures (-0.6) as $11.8 billion in new short positions were added last week.”
Bearish positions are lower for futures (-0.4), although Montagu says the risk is clearly skewed to the downside.
He added: “The Nasdaq long positions are completely offside, and the loss levels are close to 10%.”
As far as Europe is concerned, similar trends occur with the most expanding currently (- 1.7), while (+1.7) futures contracts “remain an independent market”.
“How sustainable these levels are given recent events remains to be seen,” Montagu concluded.