Investing.com -- Citi said in a note on Tuesday that bearish flows are building across the Nasdaq and S&P 500, with continued rotation into small caps signaling a divergence in global equity positioning led by the U.S. market.

The bank noted that aggregate positioning remains broadly stable, but said this "masks a growing imbalance for Nasdaq, where longs are elevated despite rising losses, leaving the market exposed to further long liquidation."

Citi noted that approximately 80% of long positions in the Nasdaq are currently offside, underscoring increased vulnerability to further unwinds.

Russell 2000 positioning, meanwhile, continues to build through new risk flows and short covering, with bullish positioning reaching extended levels.

Citi noted that "positioning profit levels are small, containing positioning risks."

In Europe, the bank said flows have weakened, with a renewed short build and long unwinds pushing positioning back toward neutral across the EuroStoxx and DAX indexes.

Citi analysts believe this "highlights fragile conviction and limited upside without a sustained improvement in flows." The FTSE was described as an outlier, with a modest long build but limited positioning profits.

In Asia, Citi said KOSPI positioning remains bullish and extended despite a recent market decline, while the Hang Seng represents "the most extreme bearish position globally," dominated by profitable short positions, with the setup leaving the index exposed to rising short squeeze risk.