The bank warns positioning in Nasdaq and S&P 500 remains vulnerable following widespread risk reduction in tech shares.
Citi strategists cautioned that U.S. equity positioning may face further pressure after a sharp selloff in technology and artificial intelligence stocks triggered broad-based risk reduction. The Nasdaq saw the most aggressive adjustment, with long liquidation and new short flows pushing positioning to its lowest level in a month, leaving all longs in loss territory.
While the S&P 500 experienced weaker positioning primarily through unwinding long positions, the Nasdaq’s decline was more pronounced. European markets also saw increased caution, with the DAX moving into outright bearish territory and bullish positioning in the Euro Stoxx retreating as investors took profits and opened new short positions.
The bank noted that crowded short positions could set the stage for a potential rebound, though current flows remain overwhelmingly bearish across large-cap U.S. equities.