Futures positioning indicates rally is running out of steam - Citi
Bullish signals from U.S. stock futures flows are diminishing, with mixed flows leaving positions neutral for the Nasdaq and slightly bearish for the S&P 500, according to Citigroup strategists.
The November rally's flows were not comparable in magnitude to the bearish repositioning in the third quarter. Although losses are accumulating on large remaining short positions, there is potential for forced unwinds to support a year-end rally.
“The first stage of the rally was accompanied by large unwinds of October’s short positioning. This turned to large new additions of long positions, but in the past week this has faded and net positioning remains near unchanged as flows were mixed and overall smaller than earlier in the month,” the strategists said.
In Europe, net positioning is relatively more bearish, as flows, while bullish, have been limited in size, and there has been no increase in ETF inflows.
“There seems to be a weak bullish momentum in Europe at best,” the analysts added.
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