S&P 500 bullishness rises ahead of FOMC decision, says Citi By Investing.com

Investing.com — Bullish flows gained momentum last week as the index recovered, Citi strategists said in a note on Monday, days ahead of the Federal Reserve’s long-awaited dovish pivot.

Strategists noted that new risk flows are the main driver of positioning in , with notional positioning reaching levels not seen since late August.

“Current position risks are skewed to short S&P positions, which are deeply in losses, but given the smaller position sizes, forced unwinds here are unlikely to lead to significant upside pressure,” strategists explained in note.

Meanwhile, futures exposure remained relatively flat, with investors cautiously increasing risk at a measured pace. A similar trend was seen in the wider, where the positioning is extended and tilted. Overall, positioning changes were more limited in both indexes.

In Europe, the positioning is more varied, with futures close to neutral, notes Citi.

“While net notional levels suggest near-average positioning, new long exposure has been light, with long positions currently at the 6th percentile, suggesting that rising investor confidence is not the main driver of the recent net notional increase,” it is shown in the note.

Elsewhere, negative sentiment in China intensified amid a worsening economic outlook.

Bearishness is significantly extended, with short positions reaching the 86th percentile and increased profits. This may prompt some short-term profit-taking, providing a temporary break from the bearish trend, however, the lack of new long flows in recent weeks indicates bearish persistence.

Japan ended the week slightly higher, but positioning was mixed as opposing flows balanced each other out, keeping net notional positioning largely unchanged.

The Fed is expected to cut its first rate cut in four years on Wednesday, a move with global implications.

While the exact size of tapering and the broader easing strategy remain uncertain, the upcoming U.S. election is another complicating factor for both global investors and policymakers looking for guidance from the Fed and hoping for a landing easy economic.