Investing.com -- Despite the S&P 500 reaching new highs, bullish positioning has been waning for the past eight weeks, according to Citi analysts.
The bank said in a note Tuesday that early gains last week faded as concerns over potential tariffs and a weaker macroeconomic outlook weighed on investor sentiment.
In the U.S., Citi analysts noted that the S&P 500, Nasdaq, and Russell 2000 all experienced increased short flows and long unwinds toward the end of the week, leading to lower net positioning.
While Nasdaq remains moderately bullish, it is still far from the extended levels seen in December, according to the bank.
“Although most positions are in loss, loss levels across the S&P and Nasdaq are relatively low, leaving limited positioning risks,” Citi states.
Elsewhere, the analysts said European equities also saw a marginal decline in position levels, with bullish momentum fading.
However, long profits remain elevated across most European markets outside the UK, leaving room for potential profit-taking.
Citi believes the recent German election outcome, which came in largely as expected, could keep profit-takers at bay in the short term.
Investors are now said to be watching for further details on whether the election results translate to a more favorable economic backdrop for Germany and the broader Eurozone.
Meanwhile, “strong bullish flows continue into China A50 and Hang Seng,” as recent positive earnings from Chinese tech firms have helped offset U.S. tariff concerns.
However, Citi analysts warn that bullish positioning is now near three-year highs, raising the risk of near-term profit-taking, particularly in the Hang Seng Index.