Slowing Flows by Bearish Investors May Signal ‘Peak Investor Bearishness’

Citi strategist Chris Montagu took note of the investor positioning that may signal that better days are coming for the US stock market.

“Bearish investor repositioning and ETF outflows have slowed following the record shift and flows before Easter,” which may signal that “we are near peak investor bearishness across equity markets, though there are not yet any bullish reversals,” Montagu said in a client note.

ETF outflows slowed to $2.5 billion after the record $25.5 billion in the prior week. The strategist sees potential for an increased bias toward unwinding the large short positions

“With three weeks of sell-offs, profits on the short positions have built to an average 3.7% with some recent positions holding nearly 7% profits. Consensus is high in positioning with 5 to 1 shorts vs longs and an eventual unwind of the shorts (profit taking) would provide material support for the market.”

In Europe, the situation is different. The bearish market positioning has remained

“Eurostoxx 50 futures positioning is steady bearish, with most shorts established in early March. These positions are largely in loss. Meanwhile, investors have extended the net long in futures, which is now the most extended since Sep-20,” the strategist added.

By Senad Karaahmetovic