Investing.com -- U.S. equity flows were led by short covering over the past week, particularly in the S&P 500 and Nasdaq , though there was limited evidence of fresh long positioning, according to Citi strategists.

Market sentiment changed abruptly during the week as headlines around U.S. reciprocal tariffs drove volatility. A 90-day pause on new tariffs announced Wednesday spurred a strong rebound, helping indexes end the week higher.

Despite the rally, strategists note that uncertainty remains elevated, with shifting signals on trade policy continuing to create market instability.

"The only certainty is that market participants will be forced to endure a period of extended market uncertainty," strategists led by Chris Montagu said.

Positioning in major U.S. indexes improved, with the S&P 500 and Nasdaq returning to near-neutral levels.

In small caps, bearish positioning also eased from the prior week’s extremes. Citi attributed most of the adjustment to the midweek rebound, while flows in the latter part of the week were subdued.

"Short covering dominated flows for both the S&P and Nasdaq, but both indexes saw limited new risk flows," strategists noted.

In the Nasdaq, gross positioning fell further, with both long and short exposures below historical norms. Russell 2000 positioning also became less bearish.

Elevated volatility has triggered deeper losses on S&P trades, and with net positioning at extreme loss levels, Citi cautions that “potential unwinds from forced covering could accelerate moves in either direction.”

In Europe, positioning is softening, with rising bearish flows in the EuroStoxx and net exposure drifting back toward neutral. The region faces growing downside risk as losses mount on remaining long trades.

“Recent market volatility has driven a sharp rise in losses for S&P 500 and EuroStoxx positions, and this could further amplify any subsequent upside/downside moves,” the strategists cautioned.

Across Asia, investor positioning weakened overall, led by new short bets. The Nikkei saw mildly bearish sentiment, while most other indexes held neutral positioning. China’s A50 index stood out with a jump in bullish flows.