Below we excerpt some thoughts from the latest note by JPM's head of Market Intel, Andrew Tyler, who focuses on yesterday's biggest story, the sudden decompression of the momentum trade.
The Momentum “unwind” was the primary topic in yesterday’s session. Our Momentum Index, JPMPURE Index, which is a L/S index was down more than 5% at one before closing down 4.0%, -2.9z. What triggered this? The index closed with the long leg down 1.8% and the short led squeezing 2.2%, so more squeeze induced than a cutting of long positions which aligns with things like Autos (JP1BAUT index) +4.2%, Homebuilder (XHB) +4.2%, Transports ex-Airlines (JP1BTXA Index) +3.7%, and Retailers (JP1RTL index) +3.0%. This seems less like a traditional Momentum unwind and more like position squaring into macro data this week.
