Investing.com -- One-sided positioning in the S&P 500 and Nasdaq contributed to Monday's stock market sell-off, according to Citi strategists led by Chris Montagu.
Bullish positioning in the S&P 500 increased over the past week as investors continued to add new risk, with flows marginally surpassing those in the week prior.
“On a normalized basis positioning rose to +3, with bullish positioning extended and one-sided,” Montagu and his team said in a note.
"Current bullish levels have also exceeded that seen in the Growth-heavy Nasdaq 100, which has witnessed mixed flows but with declining momentum as we approach a key week for Big Tech earnings.”
In the Russell 2000, positioning levels edged higher to +1.5 amid another week of short covering. While positioning in the small-cap index is also becoming one-sided on the long side, Montagu views the risks here as less significant due to lower positioning levels and relatively modest profit-and-loss levels.
The Nasdaq remains more vulnerable, with positioning still at the 90th percentile relative to three-year averages. A decline below 20,900 would leave long positions significantly exposed, with top quartile positions seeing average losses of 4.8%.
Similarly, in the S&P 500, a dip below 5,950 would result in all long positions being underwater, though average losses would be smaller.
Elsewhere, European markets saw mixed adjustments, with EuroStoxx 50 positioning returning to neutral as bullish flows increased. However, the DAX and FTSE 100 showed weaker trends, with the latter remaining bearish.
Meanwhile, in Asia, positioning levels rebounded. China's A50 benefited from bullish flows as speculation about easing US tariffs boosted sentiment, while other Asian indices shifted closer to neutral or moderately bullish territory.