Citi's Montagu sees risk for another S&P 500 short squeeze on futures positioning

November 29, 2022 5:45 AM EST
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The S&P 500 futures positioning shows the market is more balanced now after a recent rally that took the U.S. benchmark index to over 4000. Investors did add some new shorts in the S&P 500 most recently, which was reflected in yesterday’s selloff.

However, the overall picture remains generally neutral with Citi strategist Chris Montau also not seeing “any direction to ETF flows.” However, Montagu sees a risk of another short squeeze as the S&P 500 shorts are “driven entirely in loss.”

The data shows an average entry point for shorts is 3780, which implies they are underwater by nearly 5% relative to yesterday’s closing price. On the other hand, longs are in a better position with average profits standing at 3.6%.

“Nasdaq has seen a relatively dramatic shift more bullish but came from such an extended net short that positioning is still bearish and the most bearish of any market. The shorts are all in loss, but only by an average 3.2% so unless the rally extends significantly higher there is no immediate concern over a short squeeze,” Montagu added.

In Europe, both Eurostoxx and DAX have seen new longs added in the past week, pushing the latter into a net long territory. FTSE positioning was also extended more bullish last week.

“Investors remain relatively bearish US, Eurostoxx and China equities while more bullish Eur. Banks, FTSE and DAX,” Montagu added.

By Senad Karaahmetovic

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