Sharp Rebound! US "Tech Momentum Stocks" See Largest Single-Day Gain in History, But Is the Crash Over?

US tech momentum stocks saw a dramatic rebound on Tuesday (July 21). The Morgan Stanley TMT Momentum Factor surged more than 12% in a single day, marking the largest single-day rally on record—even surpassing any single-day performance during the 2000 dot-com bubble. The Goldman Sachs High Beta Momentum Long Index (GSCBHMOM) rose about 8.5% in one day, its strongest showing since April 2025; the Long/Short High Beta Momentum Index (GSPRHIMO) climbed 9.5%, its strongest since 2021 and nearing historical highs seen since 2003.

The Nasdaq Composite advanced about 1.3% on the day, leading the three major indexes. The semiconductor sector was the main driver—the Philadelphia Semiconductor Index jumped 4.6% in a single day, while the VanEck Semiconductor ETF rose about 4.5%. Micron Technology surged over 10%, Intel climbed about 8.6%, SanDisk rose around 14%, Cerebras Systems jumped about 18%, and Cipher Mining surged more than 11%.

This rebound occurred after three consecutive losing sessions and after momentum stocks cumulatively plummeted 33%.

Why did this rebound happen? Shorts were “squeezed”

To understand this rebound, you first need to grasp how severe the previous drop was.

Goldman Sachs data shows that high beta momentum stocks cumulatively fell 33% in just a few trading days, making it one of the worst drawdowns since the dot-com bust. The Goldman Sachs High Beta Momentum Index even fell below its 200-day moving average, touching the lowest point since January this year, with its oversold level the most extreme since August last year.

The deeper the drop, the greater the rebound potential—that’s a basic market logic.

This rebound was largely a “short squeeze.” Many investors shorting momentum stocks, especially trend-chasing traders from South Korea and Japan, suffered heavy losses over the last two weeks—South Korea even saw large-scale margin calls that severely hit local retail investors. When these shorts were forced to cover, the resulting buying created a self-reinforcing upward spiral.

Zacks Investment Research pointed out that Micron Technology had previously broken below the “head-and-shoulders” neckline on its daily chart, a bearish technical signal. However, on Tuesday, the stock price surged more than 10% and climbed back above the neckline. “False breakouts often trigger violent reversals, trapping late-to-act shorts and bears.”

Market breadth remains weak, rebound quality in doubt

The rebound numbers look impressive, but its internal structure is not healthy.

BTIG strategist Jonathan Krinsky analyzed that overall trading volume on Tuesday was low, with SPY, QQQ, and S&P 500 spot volumes all 20% to 30% below their 20-day averages. Meanwhile, the S&P 500 Index rose nearly 1% on the day, but there were still more decliners than advancers—this year has seen the most divergences between price and market breadth, and Tuesday was yet another such episode.

Goldman Sachs traders showed that total exchange volume was about 17% below its 20-day average, market maker book liquidity stood at just $6.83 million, and overall market activity scored just 3 out of 10.

In other words, the rebound seems more like a concentrated explosion among a handful of heavyweights, rather than a broad recovery.

Bloomberg macro strategist Michael Ball noted, “It’s too early to declare the correction is over.” Demand for put options on semiconductor ETFs and previous AI star stocks remains high. Negative Gamma exposure in Nasdaq, semiconductor ETFs and related stocks means market makers chase momentum, amplifying both upside and downside—this intensifies gains but also deepens potential losses.

BTIG warns: rebound hits key resistance, suggests fading the rally

Not everyone is bullish about this rebound.

BTIG’s Jonathan Krinsky explicitly warned against chasing and suggested to “fade” these rallies. He previously anticipated the momentum rebound would face strong resistance in the 730–750 region, and Tuesday’s pop brought GSCBHMOM right to the lower end of that zone.

Krinsky stated: “Extreme volatility and a historically high level of single-stock dispersion are signs the market is undergoing a broad-based correction.” He expects high beta momentum stocks to stall once they hit the resistance core between Wednesday and Thursday.

Historically, since 1999, the High Beta Momentum Long Index has only posted single-day gains above 7% while above its 200-day average on ten occasions. Three times occurred this year, three in early 2021, and three in early 2000. Krinsky noted this “underscores not only the rarity of the current move but also the recurring statistical patterns echoing the 1999–2000 era.”

Goldman Sachs, UBS: momentum selling is nearly done, suggest gradually increasing exposure

Unlike BTIG’s cautious tone, both Goldman Sachs and UBS believe the momentum selloff is nearing its end and recommend investors seize opportunities.

Goldman Sachs’ Julia Mensch noted in a report that last week, Goldman already signaled momentum selling was in its “late stages.” She wrote: “With positioning now largely unwound (GS Prime Brokerage data show momentum exposure at the 64th percentile over the past year, and 93rd over five years), and no new fundamental catalyst behind the sell-off, we think there is room for momentum to mean-revert. This may be a good opportunity to add momentum exposure or buy AI stocks on dips.”

Michael Romano, Head of Equity Derivatives Sales for Hedge Funds at UBS, voiced a similar view in a client note, arguing that improving AI fundamentals are a buy signal. However, he also recommended investors “build positions gradually, rather than going all-in at once.”

Romano wrote: “Momentum de-risking is, and remains, a compelling narrative. A phased approach is prudent.” He expects the momentum sell-off to bottom by the end of July (if it hasn’t already) and added: “Once the tide turns, liquidity could cause an overshoot to the upside.”

Still, Goldman Sachs maintains some caution—given the recent high volatility and the rush of earnings season, Goldman recommends investors gain exposure through “limited-loss structures,” rather than outright longs.

Earnings season: the next key variable

The sustainability of this rebound depends largely on this week’s earnings reports.

According to Reuters, this week 113 S&P 500 companies (accounting for about 18% of the index’s market cap) will report earnings. Alphabet (GOOGL)’s report is viewed as “the most important data point of the week,” with the market focused on its full-year 2026 capital expenditure guidance—a widely anticipated upward revision, which will provide clues about the trend in AI spending.

Adam Turnquist, Chief Technical Strategist at LPL Financial, commented: “Right now, the focus isn’t just on total capital expenditures, but the next topic will be ROI and quality of spending, which we think will become the core issue in the second half.”

He also pointed out: “We expect ongoing volatility in the semiconductor sector, as overbought conditions need to be absorbed, profit-taking pressure will emerge, and crowded positions need to be unwound. Fundamentally, we see no material changes.”

According to Reuters, so far, 66 S&P 500 companies have released earnings, with about 88% beating analyst expectations. 3M (MMM) jumped more than 9% in a day, and General Motors (GM) was up about 5%, both after beating estimates.

Bonds and Macro: a lurking risk

While the stock market rallies, the bond market is sounding a warning.

US Treasury yields rose across the curve that day: the short-end 2-year increased 5 basis points, the 30-year was up 2 basis points, long-end yields reached a two-month high, erasing last week’s bond rally following weaker-than-expected inflation data.

Oil was one of the drivers. Brent crude futures closed back above $90 per barrel for the first time since June 11. Tensions in the Middle East ratcheted up, with Yemen’s Houthi rebels announcing a blockade of the southern Red Sea entrance and two tankers carrying Saudi crude turning around in the Red Sea. According to Kpler’s MarineTraffic, even before the blockade was announced, throughput at the Bab-el-Mandeb Strait had already dropped 34% over the past two weeks.

RBC Capital Markets rate strategist Izaac Brook stated: “Today’s market moves were mainly driven by continued rising energy prices. Rate volatility was magnified by the break of key technical levels—2-year at 4.20% and 10-year at 4.60%—and the typical low-liquidity of summer trading.”

Bloomberg’s Cameron Crise warned, “Long bond yields are at the critical point of turning 5% from resistance into support, with the next target clearly at 5.5%—this would hit stocks, especially if economic upside surprises push yields higher and negatively impact equities.”

Goldman Sachs IG Credit Head Kevin Boova also cautioned that credit spreads for super-large tech companies have hit new highs, “the hyperscale cloud/AI/data center area is starting to feel fragile again.”