Short squeeze chances are increasing - Citi
Traders navigating bearish bets in the US stock market face the looming threat of a short squeeze, according to Citigroup Inc. strategists.
The positioning in the US equity benchmark remains mildly net long, mirroring levels seen at the start of December. Citigroup strategists highlighted that remaining shorts are gradually accumulating losses, and a potential short squeeze looms if the market extends its upward trajectory.
“Nasdaq has had comparable performance but has in contrast become the third most extended bullish positioning, though with minimal P&L exposure at current levels,” the strategists said.
Futures for US stocks displayed predominantly bullish flows in the past two months, albeit at a slower pace entering 2024. Interestingly, futures for the Nasdaq 100 are more extended than those for the S&P 500, whereas exchange-traded funds show the opposite trend.
When it comes to European equities, strategists noted the most extended bullish positioning since April 2019.
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