via MorgStan... There are a lot of similarities with this week’s unwind in crowded positions and that of January, but also a lot of differences. First the differences, which on net make this event worse than in January: 1/x
Today all of the pain is on the long side... This is concerning because long-side pain is always more challenging to deal with than a short squeeze, given most funds run long. 2/x
Both ends of the barbell trade are underperforming – NDX and RTY are going lower versus SPX. Given running a secular growth + cyclical reopening barbell has been increasingly the trend over the last few months, this underperformance is painful. 3/x
While the barbell is not working, high short interest names are working (underperforming) today, versus squeezing people in January. The bad news is that many have migrated out of single-name shorts and into ETF or broad market shorts, limiting this benefit. 4/x
Trades popular with retail are underperforming (ARK ETFs, Bitcoin, etc) – the bid from retail has been the marginal flow in the market lately, and if retail is forced out this removes an important source of downside support. 5/x
In January investors could largely write off the moves as technically-driven; this time there is a catalyst in the form of higher rates... this does little to help the positioning-driven unwind in the near-term and could delay the re-risking after this volatility passes. 6/6
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