Japan Quant Strategy: CTAs enter stop-loss mode – Is it really just a position adjustment?

Research evidence excerpt

Japan Quant Strategy: CTAs enter stop-loss mode – Is it really just a position adjustment?

Masanari Takada AC Global Markets Strategy

(81-3) 6736-8636 17 July 2026 J P M O R G A N

masanari.takada@jpmorgan.com

Positive earnings story remains intact

At the same time, from the perspective of corporate earnings, the reverse rotation of Price

Momentum does not indicate a reversal of earnings expectations. Looking at the

performance of quintile portfolios based on the TPX500 universe, the long/short positions in

Price Momentum have recently weakened significantly, but the long/short positions in EPS

Momentum, which neutralizes Price Momentum, remain relatively stable. In other words,

the weakening of Price Momentum has not, at this point, been accompanied by a collapse in

EPS Momentum.

Figure 3: Price Momentum (12m-1m, L/S), EPS Momentum (3m change in NTM EPS, L/S), and Price

Momentum-Neutralized EPS Momentum – The earnings momentum effect remains significant even when

the price effect is neutralized

The universe consists of TOPIX 500 constituents. Quintile portfolios are used, and rebalancing occurs at the end of each month.

Source: Bloomberg Finance L.P., J.P. Morgan Global Markets Strategy

Figure 4: Price Momentum (12m-1m, L/S), EPS Momentum (3m change in NTM EPS, L/S), and Price

Momentum-Neutralized EPS Momentum – Back test performance (January 1, 2023 – July 17, 2026)

The universe consists of TOPIX 500 constituents. Quintile portfolios are used, and rebalancing occurs at the end of each month

This point suggests that the current sell-off may be a position adjustment strongly skewed

toward price momentum rather than a reversal in medium- to long-term earnings expectations

or structural themes. We believe the decline in AI-semiconductor stocks and high-