Bank of America warns a renewed downside move in stocks could trigger another wave of selling by trend-following funds. After last week's geopolitical-driven selloff, these systematic investors largely held their long equity positions. Their resilience now leaves markets vulnerable if losses deepen, as stop-loss levels are closer.

BofA analysts led by Chintan Kotecha said a further bearish move could prompt significant de-risking, likely 3-5% below current prices. Beyond equities, they flagged stress in currency positioning, particularly for the Japanese yen. Recent yen strength has left systematic funds 'stretched short,' raising the risk of rapid short covering if the rally extends.

In commodities, trend followers have already started unwinding bearish bets. Natural gas futures rose for a fifth straight week, prompting short covering, while U.S. cold snaps likely forced Commodity Trading Advisors out of remaining short positions. The key question is whether equities will follow this pattern or break lower.