(Bloomberg) -- The rally in equity markets in the run-up to this week’s Federal Reserve meeting is being driven by limited investor flows, say Citigroup Inc. strategists.

There’s been “mixed and weak momentum” behind the stock gains over the past two weeks, a team led by Chris Montagu wrote in a note, highlighting a divergence in sentiment on US equities. While S&P 500 futures saw some bullish support, investors extended a net short positioning in the tech-heavy Nasdaq.

“Large long and short positions are offsetting each other” on the S&P 500, the Citi strategists said. “Two-thirds of shorts are in loss at 3,865 and all shorts will be in loss above 4,000, which would increase the pressure and a short squeeze could support the market higher near-term.”

The S&P 500 is up about 8% since mid-October as the earnings season picked up pace and investors speculated on the Fed’s rate-hike trajectory ahead of Wednesday’s decision. The central bank is widely expected to raise interest rates by 75 basis points for the fourth meeting in a row, with traders awaiting Chair Jerome Powell’s comments for cues on the path forward.

In Europe, Euro Stoxx 50’s positioning is very “one-sided bearish,” according to the note. Strategists say the recent rally in the region was entirely driven by investors unwinding risk, amounting to a net $3.7 billion of short positions unwound.

--With assistance from Farah Elbahrawy.

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