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Citi sees profit-taking risks as Nasdaq futures positioning nears 3-year highs

Published 01/23/2024, 08:06 AM
Updated 01/23/2024, 08:13 AM
© Reuters.  Citi sees profit-taking risks as Nasdaq futures positioning nears 3-year highs

Citigroup equity strategists noted that bullish Nasdaq 100 futures flows are becoming increasingly extended in terms of positioning and profits, raising concerns about potential profit-taking risks.

Investors continued to increase risk exposure to S&P 500 and Nasdaq 100 futures last week, according to the broker’s strategists.

“Nasdaq futures positioning is near 3-year highs, reflecting a bullish tilt far exceeding the S&P, as sentiment appears to be favoring Growth stocks into the earnings season,” they said.

The average long position in the Nasdaq 100 is now near a 5% profit, heightening the risk of profit-taking unwinds and posing a potential headwind for a sustained rally in the near term.

Nasdaq 100 futures positioning is approaching three-year highs, with sentiment seemingly favoring growth stocks into the earnings season.

In contrast, European stocks experienced outflows, primarily driven by a mix of new shorts and long covers. Despite this, net notional levels remain positive and extended bullish for the DAX and Euro Stoxx 50.

Meanwhile, sentiment in Asia remains weak, particularly for the Hang Seng and China A50, which are both extended short.

“In particular Hang Seng which is near the most shorted levels seen in the past 3-years. Short positioning and profits are very extended, and this could lead to bouts of profit taking. Nikkei positioning bucks the regional trend, with futures positioning increasingly bullish last week and turning moderately extended.

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