Citi sees a step up in bearish equity flows

Citi analyst Chris Montagu said in his equity markets positioning model note Tuesday that there has been a step-up in bearish flows.

The analyst wrote that short positioning rose over the week, with both US and European indices seeing increasingly pronounced new short flows.

"The rapid ascent of new shorts across S&P last week has driven net positioning to more neutral levels," said Montagu. "Downside risks though
appear contained for now with only a small build-up in long losses as indices have declined."

Citi said that in Europe, short positioning has also grown, but to a lesser degree than in the US. Focusing on the US, Montagu stated that over $9 billion in new notional short positions were added to the S&P last week, leading to a further decline in bullish positioning.

"In Nasdaq activity was more mixed, but the downward trend for bullish positioning remains consistent across US equities," Montag explained. "Long (S&P) average loss levels have not risen significantly even though nearly all positions are in loss. Still, there is increasing risk of unwinds should the current trend persist."

By Sam Boughedda

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