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Citi sees limited stock gains as investors lock in profits

Published 11/07/2023, 07:52 AM
Updated 11/07/2023, 07:54 AM
© Reuters.  Citi sees limited stock gains as investors lock in profits
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Investor sentiment regarding the Nasdaq is displaying signs of improvement as approximately $3 billion in new "risk flows" were introduced to futures linked to the growth-heavy index last week, as reported by Citi strategists.

This shift in positioning is notable as, on a normalized basis, Nasdaq positioning has become only marginally bearish, a significant change from the preceding week.

Furthermore, weekly futures activity for the Nasdaq saw notional changes that exceeded those of the S&P, an occurrence considered rare by the strategists.

The strategists also mentioned that profit-taking has contributed to "cleaner, less skewed positioning" and a decrease in overall positioning risks. However, they cautioned that market gains resulting from short covering may be less likely in the near term.

“Market gains on the back of further short covering appears less likely in the near term, with much of the price action taking the market out from oversold territory seen in our US oversold index which has briefly crossed into overbought conditions,” the strategists said.

Despite these positive shifts in sentiment, the strategists pointed out that optimism in the Nasdaq may be driven by bets on rates reaching their peak.

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