Monday's historic Momentum unwind showed up in some of the European equities price action on Tuesday as top-performing sectors sold off.
"We can call it cracks in the momentum story, as a lot of the highflyers are being sold while the laggards are being picked up", Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, told Bloomberg in an e-mail. He flagged "similarities" with what happened in the US to start the week.
As a reminder, Monday's factor reversal was dramatic. Indeed, "dramatic" is wholly insufficient as an adjective when it comes to describing how anomalous it was.
Read more: Massive Momentum Factor Unwind Triggers ‘Epic’ 7 Z-Score Performance Bleed
Nomura's Charlie McElligott was all over it. Before the bell, he flagged the potential for a continuation of a recent multi-day move in his “Pain Trade” index, which he explained is just the “simple ratio of a ‘Value’ factor proxy versus Momentum'”. Hours later, he sent out another quick blast which described what was taking place below the hood in US equities.
The action, documented here in real-time (see the linked post), was also picked up by Bloomberg, which quoted Charlie in a short piece
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