Despite the rally Wall Street experienced last week, Citi reported Tuesday that market positioning remains bearish, with traders failing to enter the market with any concerted buying.
"For six consecutive weeks since the beginning of April, investors continued to add new shorts and, hence, extend their bearish bias on the market," Citi stated in a note. "While this bearish momentum did fade at the end of May, the past week has shown no signs of any bullish flow momentum to support a more sustained rally from here."
Citi added: "The large flow of new shorts has halted, but notably there are no signs of new long positions yet and ETF flows lack direction."
The firm acknowledged that a short squeeze was possible but "the probability appears to be low." Meanwhile, the firm tracked "hardly any flow momentum" behind the recent rally.
Citi noted that S&P 500 shorts are clustered around the 4,000 level, leaving the firm to conclude that "the balance would swing again if we break that level."
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>We are a 130 points above that 4000 level /// why am I getting a whif of fear here!
something weird... Fri Great Report SURPRISE! HUGE rally and Reversal....
>This set up is not good. Shorts will be encouraged but nothing will do that for longs...
