"Quant blame game over stock sell-off pits Nomura against Nomura"

This is a placeholder until ZeroHedge gets around to posting Charlie McElligott's latest on the CTA crowd.
From the Australian Financial Review, yesterday:

London | After Nomura apportioned blame for Tuesday's dramatic stock plunge on trend-following quants, an unlikely defender has emerged for the systematic hedge funds: Nomura.

In the quest to uncover the culprit behind the S&P 500's 3.2 per cent rout, the investment bank has emerged conflicted over the role of computer-driven traders that surf the market's momentum.

The schism hinges on differences in how strategists there calculate the way programmatic traders reacted to shifts in sentiment this week - and the buy and sell orders seen along the way. Figuring out their next moves could be crucial in prepping for the next downleg - depending on whose quant story you buy into.

Their esoteric investing style and billions in equity holdings that can be liquidated en masse once again finds trend-chasers at the centre of market intrigue. In the past, it's pit AQR Capital Management against the likes of JPMorgan Chase & Co.

At Nomura right now, it's in-house. The first shot came from Charlie McElligott on the equity-derivatives sales team in New York. His quant model, which reverse-engineers returns, has obtained something of a cult-following on Wall Street - flashing out sell signals during especially tumultuous days.

On Tuesday, he argued commodity trading advisers, or CTAs, hammered markets to the downside as a three-month measure of S&P 500 momentum turned negative.
Less than 24 hours later, his Tokyo-based colleague with the research team, Masanari Takada, told clients CTAs couldn't possibly serve as the whipping boy - having pared their bullish positions in the earlier autumn swoon.

"On our research side, the CTA model did not show any selling signal beforehand, and CTAs were forced to follow the market decline somewhat," Takada said by email.

His model suggests coming into this week, CTAs had a modest overweight position that fell in sympathy with the broader market on Tuesday - the worst day since the Brexit referendum for the S&P following a 1 per cent gain.

Differences in published opinion within investment banks are common given the complexity of high-octane markets.

McElligott reckons these leveraged funds were bullish to the max - adding $US42 billion of fresh exposure thanks to Monday's rally, which was spurred by expectations the G-20 had secured a thawing in Sino-US trade tensions.

Those longs were then abruptly whittled down to a fifth the following day - helping to whipsaw US stock markets in the process, according to the strategist.

"Due to the choppiness and volatility profile year-to-date, you've had a really tight band - basically 100 points - that in two days of trading can go from max long to max short," McElligott said by telephone. "CTAs' impact, and potentially their part in the overall market, is larger than usual because fundamental managers have been so crushed by performance and grossed down."...MORE

Previously:
Tues. Dec. 4
Markets: What Triggered the Latest Whack