Momentum Unwind with Investors Switching Mindset, Optical results, Gaming Names, Software, Memory, INTC, and more

It feels like broken record that we keep repeating the volatility has gone wilder by week. We are no market expert, and we seldom comment on its movement. However, we don’t think the momentum unwind in the past week has much to do with fundamental change but quant quake at a super stretched market positioning.

To recall, in Mar 2025, the last phase of accelerated momentum unwind was partially due to a major failure of some index arbitrage funds in the US. They put highly concentrated bet on several names including APP, COIN, TTD and HOOD in anticipation of SP500 inclusion, and has to unwind the huge positions after misjudgment, draining liquidity quickly from the market. This has led to massive momentum unwind in other names, which was drastically exacerbated in a volatile beta draw down. Once selling in these names settle, liquidity improved and helped market calm down.

Coming back to the past weeks, gold and silver futures have become the new APP/COIN/TTD/HOOD, which were bet heavily by every quant models and retails around the globe. As new FED chair was announced, precious metals were suddenly weighed by a negative catalyst (whether Warsh is actually a hawk or not doesn’t really matter), sending retails to get out of their GLD and SLV long as fast as possible, and also selling their other names in liquidity crunch. Meanwhile, the hedge funds were all longing semi/hardware and shorting software. As SaaS became Software-as-a-Selloff, their short position shrank to fast and therefore had to degross the long book as well, further accelerating the liquidity drain. Weak MSFT/NOW/SAP results and world model narrative on gaming names obviously didn’t help either. But just like last April, once gold and silver selling settled, liquidity improved and market calmed down.