Positioning points to further S&P 500 upside

Investing.com – US stock indices are near all-time highs, and Citigroup sees potential for further upside as investor positions turn increasingly bullish, while positive flows in Europe have stalled.

The two indices rose to record levels last week, and Citi sees the potential for further gains based on new risk flows, the bank said in a note dated May 20.

“Bullish position levels continue to rise for the S&P and Nasdaq, as last week's activity was driven by increased new risk flows,” the bank said, as the S&P saw $17 billion of notional value added last week from new risk flows.

“This leaves the S&P index almost exclusively extended and one-sided. However, profit levels are only just beginning to develop, limiting positioning risk.”

The same degree of confidence has not been reflected in Nasdaq flows – despite the increase in long positions, net notional levels remain close to neutral, and have changed only marginally in recent weeks.

Although the inflows into the Nasdaq were positive, they were small and were beginning to appear after a recent period of rapid decline in GDP. The theoretical net, although positive, is small, suggesting continued but limited optimism.

Turning to Europe, positioning momentum in Europe appears to be weakening, Citi noted.

“Nominal levels were declining for EuroStoxx, while European banks were flat,” Citi added. “Euro banks remain the most stretched among the indices we track and pose the greatest positioning risk.”

PointsPositioningupside
Comments (0)
Add Comment