Watch S&P 3,700 for brief squeeze potential, Citi says

The inventory market is rallying for the second-straight session Tuesday, with the S&P (SP500) (NYSEARCA:SPY), Nasdaq 100 (NDX) (QQQ) and Dow (INDU) (DIA) gaining greater than 1%.

Traders ought to hold a watch on S&P 3,700 into the shut, in accordance to Citi. It has traded above that for a lot of the session, having bounced after a breach decrease in noon.

“A few fifth of brief positions are already in loss at 3,650, with greater than half ($17bn notional) within the purple if the market strikes above 3,700,” Citi world head of quant technique Chris Montagu and workforce wrote in a observe. “This represents a average threat of a brief squeeze for even a brief rally from present ranges. A squeeze might amplify any restoration rally near-term.”

The S&P noticed bullish flows on the finish of final week, persevering with a pattern from early October, however total positioning remains to be bearish, Montagu mentioned.

“It’s nonetheless early days to say if this represents a basic shift in sentiment.”

Trying to the Nasdaq 100, it gained greater than 3% yesterday, however did so fully inside Friday’s vary, BTIG technical strategist Jonathan Krinsky famous.

“That qualifies as an ‘inside day’,” Krinsky mentioned. “A 3% inside day is sort of uncommon, and has occurred simply 9 different occasions when beneath its 200 DMA since inception in 1985.”

“Whereas stats, significantly these with small pattern sizes, ought to by no means be utilized in isolation, we expect the current motion is telling and has tended to happen within the midst of bear markets greater than the beginning of latest bulls,” he added. “Common and median NDX returns following this incidence 20 days out have been -7.24% and -11.32%, respectively.”