Trend-following funds could continue buying the Nasdaq and Japanese equities if markets remain stable or rise, according to Bank of America. The bank's research note on Friday stated that Commodity Trading Advisors (CTAs) continued buying equities for the week ended August 14, as gains across major indexes reinforced positive price trends. Estimated CTA equity positioning has risen to its highest level since the Iran conflict began in March. Additional buying remains possible in the Nasdaq and Nikkei 225, particularly from slower-moving trend-following strategies.
Market Trends
The bank's model showed the Nasdaq-100's short-term trend signal at -7%, compared with 63% for the medium-term signal and 100% for the long-term signal, indicating a mixed but predominantly positive positioning backdrop. Systematic sell triggers remained relatively distant across major indexes, with declines of more than 4% generally needed to generate meaningful CTA selling.
Potential Outcomes
The bank's models estimate systematic strategies could buy $11 billion if global equities rise over the coming week, or $19 billion if markets remain broadly flat, while a down market could trigger about $96 billion of selling.