According to UBS strategists, systematic trading funds have been increasing their short positions in stocks, but they do not anticipate significant flow in the near term.
Commodity Trading Advisors (CTAs) have notably raised their short positions by 50% in the past three weeks, shifting from -$60 billion to -$92 billion, which represents a change from -17% to -26% of their assets under management.
In the bond market, CTAs are short, but they have been in a "wait and see" mode since mid-September. They are expected to start covering their short positions in the next two weeks, according to UBS’ analysis.
In FX, CTAs hold a "very long" position on the dollar and continued to buy in October. A strong Non-Farm Payrolls (NFP) release could increase volatility and mitigate downside risk on the currency.
In the commodities market, CTAs are rapidly closing their relative value trade of being "long energy vs short precious," and more covering in this trade is expected over the next two weeks.