Financial institution of America analysts say US pattern followers, also called CTAs (Commodity Buying and selling Advisors), are holding “very elevated ranges” of lengthy positions in equities, notably the and NASDAQ-100.
BofA’s “Systematic Flows Monitor” notes these longs benefitted from current market positive aspects and decrease volatility.
Whereas BofA’s mannequin anticipates these stretched positions can face up to a reasonable decline, a pointy drop may set off stop-loss orders – 2.7% decrease for the S&P 500 and three.8% decrease for the NASDAQ-100, primarily based on Friday’s shut.
BofA sees extra potential for CTA motion in Japan, the place the pattern follower lengthy hasn’t reached Q1’s highs. They count on shopping for in as worth tendencies are forecast to rise.
The financial institution’s word additionally suggests CTAs may add lengthy positions to 10-year US Treasury futures (UST) subsequent week, anticipating decrease yields after current information indicating a moderating labor market.
General, the report highlights CTAs chasing tendencies throughout asset courses. BofA expects continued oil shopping for and a weaker US greenback whereas anticipating gold longs to carry and aluminum longs to lower. In FX, BofA’s mannequin suggests CTAs will cowl brief positions in EUR, MXN, and CAD whereas including to AUD longs.
