Citi's Chew says U.S. stock positioning unwind may not be over

Investing.com -- Citi told investors in a note that the recent technology-led selloff has triggered a broad deterioration in equity positioning across major markets, with the firm warning that "the unwind may not be over" in U.S. stocks.

According to strategist David Chew, the sharpest adjustment occurred in the Nasdaq, where positioning "reset lower but remains vulnerable given all longs are currently in loss."

U.S. positioning is said to have deteriorated sharply as the AI and technology selloff triggered widespread de-risking, with flows "overwhelmingly bearish across large caps."

While S&P 500 positioning eased primarily through long unwinds, Citi said Nasdaq positioning saw "a more aggressive combination of long liquidation and new short flows," leaving positioning at a one-month low.

In Europe, Citi noted that bearish positioning is building faster than prices are falling, with European investors continuing to reduce risk through profit-taking and new shorts. This has pushed the DAX into outright bearish territory, while EuroStoxx bullish levels also declined.

Chew noted the week's activity reflected investor concerns around technology and semiconductor exposure, though the increasingly crowded short base "creates asymmetric squeeze risks should sentiment stabilise or macro data surprise positively." The FTSE was a bright spot, with positioning improving on short covering and rising risk flows.

In Asia, Citi said bearish flows were widespread, with the KOSPI remaining "the market most exposed to further deleveraging" given elevated positioning despite the recent index decline.

Citi added that upcoming earnings will be key in determining whether positioning stabilizes or unwinds further.

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