In their equity markets positioning note Tuesday, Citi analysts told investors that S&P 500 positioning is still extended.
While most equity markets sold off in the past week, the flows in futures markets were limited, leaving positioning broadly unchanged, explained analysts.
"Investors reduced leverage to US equities marginally but retain a one-sided very bullish positioning. A similar dynamic can be found for the Nikkei which continues to be the most extended market," they wrote.
When it comes to U.S. equities, the analysts stated that it is "still very extended" despite positioning being off its recent peaks.
"The latest small drop has reduced the average profit levels on longs which in turn reduces the risk of profit taking, but the flow risk from here, given how extended positioning already is, is asymmetric to the downside," analysts added.
Focusing on Europe, Citi believes Eurostoxx net long positions are now in loss and "further weakness in European equities could be amplified as investors cover these long positions," while in Asia, they noted that the Nikkei net long market position is the most extended that they cover.
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