In a Tuesday note, Citi strategists said U.S. technology stocks may be put under substantial pressure as investors continue de-risking their portfolios before new economic data.
Citi says that over the last four sessions, investors reduced risk across most markets.
Indexes in the U.S. started rising again as investors unwound short positions. The trend of de-risking however persisted despite prices stabilizing.
Several key updates on U.S. inflation and growth will be released this week, with the Consumer Price Index (CPI) due to be released on Wednesday, followed on Thursday by jobless claims, industrial production, and retail sales data.
Recent unwinds in the S&P 500 have taken net notional positioning close to neutral. Net positioning in the NASDAQ Composite is however still extended at +3.2 normalized.
Strategists wrote this had driven the negative mark to market to extraordinary levels and there would be significant pressure on these long positions on any negative economic data.
Citi highlighted the NASDAQ faces $22.5B in long positions that are at risk of possible unwinding, with average positioning staying in loss below 20,050.
For the NASDAQ , exchange-traded fund (ETF) flows have already moved negative, although they are still flat for the S&P 500.
The European market is also seeing degrossing before the upcoming U.S. inflation report.
