Investing.com -- Global financial markets will remain under selling pressure from systematic trading strategies, as commodity trading advisors (CTAs) continue to show signs of selling bias across both equities and bonds, analysts at Bank of America said on Monday.

CTAs refer to professionals or firms that specialize in managing and advising on trading futures contracts, options, and foreign exchange contracts or swaps. According to BofA, despite markets having showed signs of recovery, systematic trading flows continue to pose downward pressures with CTAs likely to remain a key catalyst for the volatility in the near term.

U.S. equities observed a roller-coaster Good Friday week which saw a euphoric relief rally that contributed to strong weekly gains, largely on the back of Middle East de-escalation hopes. However, uncertainty continues to hang over markets as messaging on the Iran war remains mixed amid fighting that continues to rage on.

“Despite the sizeable rally in equities, the benchmark CTA index did not post meaningful losses on either Tuesday or Wednesday, suggesting the complex was not yet uniformly, or maximally, short and reinforcing our prior view that a meaningful share of CTA Assets Under Management sits in slower moving models,” BofA analysts led by Chintan Kotecha said in a research note on Sunday.

The analysts noted that while faster CTA trading models are heavily short, slower-moving models still hold neutral or residual long positions, indicating that bearish positioning is not yet exhausted.

Copper Is Short, Gold May Follow

Precious metals fell last week as investors piled into riskier assets like equities on Iran war de-escalation hopes.

According to BofA, precious metal futures price trends continue to fall after recent declines. The note further added that the fastest moving CTAs could already be short on copper and could soon turn short on gold as well.

BofA said that it estimates that systematic strategies could sell up to $51 billion in equities in a declining market over the next week, compared to modest $1 billion buying in stable or rising conditions.

On Sunday, Trump in a Truth Social post said that the U.S. would strike Iran’s power plants and bridges if the critical Strait of Hormuz isn’t opened by Tuesday.