TLDR
- Citi says bearish flows are building in the Nasdaq and S&P 500, while money rotates into small caps.
- Roughly 80% of long positions in the Nasdaq are currently losing money, raising the risk of further selling.
- The Nasdaq 100 fell nearly 2% this month, on pace for its worst June since 2022.
- Hedge funds sold U.S. tech stocks last week at the fastest pace in more than a decade, according to Goldman Sachs.
- European positioning has weakened, while the Hang Seng shows the most extreme bearish setup in the world.
Citi released a note on Tuesday outlining shifts in how investors are positioned across major stock indexes. The bank said bearish flows are building in both the Nasdaq and the S&P 500.
CITI WARNS OF GROWING BEARISH PRESSURE ON NASDAQ
Citi says bearish positioning is building in the Nasdaq and S&P 500, with elevated long positions leaving the Nasdaq vulnerable to further selling.
Meanwhile, investors continue rotating into small-cap stocks.
In Europe,…
— *Walter Bloomberg (@DeItaone) June 30, 2026
At the same time, money is moving into small-cap stocks, marking a divergence in how investors are betting on different parts of the U.S. market.
Citi explained that overall positioning looks stable on the surface. But the bank said this stability hides a growing imbalance inside the Nasdaq.
Long Positions Face Pressure
According to Citi, long positions in the Nasdaq remain high even though losses have been increasing. Strategist David Chew said nearly 80% of those long positions are currently in the red.
Chew wrote that this leaves the market exposed to more selling if those losing positions get unwound. He added that long positions on the Nasdaq are still much larger than short positions.
This imbalance matters because when many investors hold the same losing bet, they sometimes sell at the same time. That kind of selling can add extra pressure on stock prices.
Meanwhile, the Russell 2000, which tracks small-cap companies, is seeing the opposite trend. Citi said positioning in the small-cap index continues to build through new risk-taking and short covering.
Bullish bets on the Russell 2000 have reached extended levels. Citi noted that profit levels tied to this positioning remain small, which limits how risky the current setup is.
Global Markets Show Mixed Signals
The pullback comes as skepticism grows around the high valuations of artificial intelligence stocks. This skepticism has weighed on technology shares throughout June.
The Nasdaq 100, which holds many of the largest tech companies, fell close to 2% this month. That puts the index on track for its worst June performance since 2022.
Data from Goldman Sachs’ prime brokerage unit shows hedge funds have also been pulling back from U.S. tech stocks. Last week’s net selling reached the highest level in more than ten years, both in dollar terms and relative to other sectors.
Outside the United States, Citi said flows in Europe have weakened. Short positions are building again while long positions are being unwound, pushing overall positioning back toward neutral in the EuroStoxx and DAX indexes.
Citi described this as a sign of fragile conviction among European investors. The bank said upside in these markets is limited without stronger flows going forward.
The FTSE stood out as an exception, with a small increase in long positioning. However, profit levels tied to that positioning remain limited.
In Asia, the KOSPI remains bullish and stretched even after a recent decline in the market. Citi said this leaves it exposed to a similar risk as the Nasdaq.
The Hang Seng shows the opposite extreme. Citi called it the most bearish positioned index in the world right now, dominated by short positions that are currently profitable.
That setup leaves the Hang Seng open to a short squeeze, where rising prices force short sellers to buy back stock and push prices higher.
Citi’s overall view is that bearish flows are building in major U.S. indexes while money rotates toward smaller companies, a pattern the bank will continue watching in the weeks ahead.
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