--- title: "Panic Buying! \"Momentum Trading\" Sweeps US Market, \"Historical Extremes\" Draw Attention" type: "News" locale: "en" url: "https://longbridge.com/en/news/285793114.md" description: "The fervor for momentum trading in US stocks continues to climb, with the S&P 500 hitting record highs and the Philadelphia Semiconductor Index surging 11% in a single week. However, underlying structural concerns are emerging: gains are concentrated in large-cap tech stocks, market breadth is deteriorating, and defensive factors remain under pressure. Barclays warns that momentum has reached extreme levels, while UBS cautions that AI winner stocks are \"very fragile\" in the short term, recommending downside protection" datetime: "2026-05-09T03:11:53.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/285793114.md) - [en](https://longbridge.com/en/news/285793114.md) - [zh-HK](https://longbridge.com/zh-HK/news/285793114.md) --- # Panic Buying! "Momentum Trading" Sweeps US Market, "Historical Extremes" Draw Attention The heat of momentum trading in the US stock market continues to rise. Amid multiple positive catalysts, the chase for gains has spread to various asset classes, including junk bonds and cryptocurrencies, prompting warnings from Wall Street. On Friday, the S&P 500 hit a record high, the Philadelphia Semiconductor Index surged 11% over five trading days, and US stocks have risen for six consecutive weeks. This week, signs of easing tensions involving Iran, stronger-than-expected US employment data, and another significant rally in AI chips collectively pushed the already overheated momentum trade to new heights. Momentum indices experienced significant volatility this week but ultimately closed higher. Although approximately 85% of S&P 500 components exceeded earnings expectations this quarter, providing fundamental support for the rally, some investors warn that this trade is fragile in the short term and rotation risks are accumulating. Barclays strategists warned that momentum has reached extreme levels that have historically signaled sell-offs; Goldman Sachs' trading desk also pointed out this week that valuations for high-momentum stocks are significantly elevated, with position sizes at multi-year highs. ## Momentum Trading Spreads Across All Assets, Led by AI Chips The logic of momentum trading is simple and brutal: buy the biggest gainers and sell the weakest performers. This strategy applied to almost all asset classes this week. Junk bonds, cryptocurrencies, and semiconductor stocks were without exception swept into the same "risk-on" script. The chip sector performed particularly strongly, with AMD's weekly Relative Strength Index (RSI) approaching historical peak overbought levels. The software sector also rebounded for the fourth consecutive week, rising more than 5% for the week, after suffering a sharp decline earlier in the year. Options data shows that as the US stock market repeatedly hits new highs, traders are flocking to call options with near-record enthusiasm. The volume of call options in the individual stock options market exceeded put options by the largest margin in about four years. Barclays' Equity Frenzy Indicator shows sustained bullish sentiment among retail investors, with its one-month moving average at approximately 14.3%, nearly three standard deviations above the long-term average. Wallstreetcn mentioned that this frenzied trading environment reminds analysts of "post-cycle excessive optimism." **Greg Boutle, Head of US Equity and Derivatives Strategy at BNP Paribas, stated that the current environment "is starting to feel a bit like the late 1990s."** ## Mechanical Chase for Gains, Quality of Rally Questionable The internal structure of the market reveals another side of this rally. **According to Bloomberg analysis, this rebound has distinct mechanical characteristics: During the initial phase of the Israel-Iran conflict, institutional investors generally held low positions. As stock prices rose and volatility fell, forced covering created a positive feedback loop—higher prices, lower volatility, and stronger demand for call options, repeating in a cycle.** However, market breadth continues to deteriorate. The rally is increasingly dependent on large-cap tech stocks, semiconductors, and AI-related targets, while the contribution from other constituents is shrinking. The value factor turned downward after a strong first quarter, the low-volatility factor declined for the sixth consecutive month, and the quality factor (preferring companies with strong profitability and low leverage) remains under pressure, with its 60-day correlation to the Momentum Factor nearing a one-year low. **This is a typical characteristic of risk-on rotation—defensive factors recede relative to speculative factors when the latter surge.** Regarding chip stock valuations, although the forward P/E ratio (24.4x) remains below the 2024 peak of 30.4x, the price-to-sales ratio is currently at historical highs. ## Barclays and Goldman Sachs Both Warn: Valuations and Positions Reach Extremes Despite the sharp rally, warning signals from institutions are appearing frequently. Alexander Altmann, Global Head of Equity Tactical Strategy at Barclays, pointed out in a report this week that investors are flooding into winner stocks. Historically, this phenomenon has often preceded crashes in the momentum factor, as seen during the 2008 global financial crisis and the launch of COVID-19 vaccines in 2020. **He warned that this momentum rally has reached extreme levels that have historically signaled corrections.** Goldman Sachs' proprietary data similarly shows that valuations for high-momentum stocks are stretched, and institutional holding levels are at multi-year highs. Michael Romano, Head of Hedge Fund Equity Derivatives Sales at UBS Securities, stated that AI winner stocks have risen more than 50% from their March lows, and "the Momentum Factor feels very fragile in the short term," adding: > One could consider hedging AI winner positions by holding short-term downside protection. Thursday's market offered a brief preview: **News of renewed US-Iran tensions once severely impacted leading AI stocks, with the momentum index recording its worst performance in three months.** However, these losses were quickly recovered on Friday. ### Related Stocks - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [VOO.US](https://longbridge.com/en/quote/VOO.US.md) - [VUG.US](https://longbridge.com/en/quote/VUG.US.md) - [SOXQ.US](https://longbridge.com/en/quote/SOXQ.US.md) - [MGK.US](https://longbridge.com/en/quote/MGK.US.md) - [XLK.US](https://longbridge.com/en/quote/XLK.US.md) - [SOXX.US](https://longbridge.com/en/quote/SOXX.US.md) - [SCHG.US](https://longbridge.com/en/quote/SCHG.US.md) - [SOXL.US](https://longbridge.com/en/quote/SOXL.US.md) - [IUSG.US](https://longbridge.com/en/quote/IUSG.US.md) - [IVV.US](https://longbridge.com/en/quote/IVV.US.md) - [SPY.US](https://longbridge.com/en/quote/SPY.US.md) - [IWF.US](https://longbridge.com/en/quote/IWF.US.md) - [SMH.US](https://longbridge.com/en/quote/SMH.US.md) - [XSD.US](https://longbridge.com/en/quote/XSD.US.md) - [UPRO.US](https://longbridge.com/en/quote/UPRO.US.md) - [QQQ.US](https://longbridge.com/en/quote/QQQ.US.md) - [BCS.US](https://longbridge.com/en/quote/BCS.US.md) - [BARC.UK](https://longbridge.com/en/quote/BARC.UK.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [AMD.US](https://longbridge.com/en/quote/AMD.US.md) - [UBS.US](https://longbridge.com/en/quote/UBS.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) ## Related News & Research - [LIVE MARKETS-BofA clients return to US stocks as ETF inflows hit record](https://longbridge.com/en/news/285402466.md) - [RBC lifts S&P 500 year-end target to 7,900 on AI optimism](https://longbridge.com/en/news/285668135.md) - [FACTBOX-Hedge funds turn nimble to deliver April gains, say sources](https://longbridge.com/en/news/285350801.md) - [Is Sandisk Stock a Buy on Surging Revenue and New Contract Structures?](https://longbridge.com/en/news/285226315.md) - [US Equity Rally Lacks The Usual Signs Of A Top](https://longbridge.com/en/news/285106456.md)