Reuters reports that Citi said that a squeeze of short positions looks set to drive a further rally in the S&P 500 index.

Nearly $10 billion worth of shorts were unwound last week on the S&P 500, the largest rate since April, and $21 billion shorts still remain and are in loss, analysts at Citi said.

"There is potential for further short squeezes supporting market gains for another week or two given the size of the remaining short base," they wrote in a report.

They also said that at 4,000 points holders of long positions on the index could be tempted to take profit, potentially holding back the market in the short term.