Bullish sentiment is showing signs of weakening for the S&P 500, even as the benchmark index rose for the fifth consecutive week, according to Citigroup strategists.
Short positioning is on the rise again, and the S&P 500 concluded the previous week with increased bearish levels. In contrast, Nasdaq positioning stabilized near neutral and saw less change.
Citigroup's analysis indicates that S&P 500 short covering risk remains high, given the relative size of short positions and the accumulation of losses as the market continues to grind higher.
In Europe, positioning turned more bullish, with Euro Stoxx 50 positioning becoming neutral, and DAX is now moderately bullish.
“With inflationary fears abating, a degree of confidence appears to be returning to Europe with positioning turning more bullish,” strategists said.
“Unlike the S&P, short notional levels, on an absolute and relative basis are small, as a consequence forced covering risks are less extensive here and may have a lesser impact.”
Positioning in Asia was more mixed, with Nikkei 225 and S&P/ASX 200 notional levels experiencing marginal changes over the week.
By Senad Karaahmetovic