Citi Warns Nikkei, KOSPI and S&P 500 Primed for Short Squeeze as Bearish Bets Pile Up

Citi warned on September 23, 2026, that short positions have rebuilt across global equity markets, setting up the Nikkei, South Korea's KOSPI and the S&P 500 for outsized short-covering rallies should a positive catalyst emerge. Strategist David Chew's team said investors cut directional risk further last week, with crowded shorts concentrated in U.S. small caps, Europe and parts of Asia. Many positions are already underwater, creating asymmetric upside risk. The de-risking followed the Fed's first rate hike in three years, further Bank of Japan policy adjustments, rising energy prices and geopolitical tensions — what Citi called one of the most synchronized risk-off waves of this rate cycle. Russell 2000 positioning posted the largest weekly decline of any market Citi tracks. Nikkei, KOSPI and Hang Seng shorts sit near record highs, with over 40% of Nikkei and KOSPI shorts now losing money. Roughly 80% of S&P 500 long and short positions are underwater, tilting risk toward a squeeze.