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Pisani: Long and Short Financial Unwind Continues

The great unwind in financials continues. It's a strange day for traders in financials, but look beneath the surface and it definitely looks like traders are unwinding positions...both long and short positions.

Look at the biggest cap names, all DOWN 1 to 2 percent: JPMorgan Chase , Wells Fargo , B of A , US Bancorp . These are among the most heavily owned of the financials.

Now look at the smaller regional banks, most of which are trading UP 1 to 2 percent: Regions Financial , Zions , Fifth Third , Huntington Bancshares and Suntrust . These stocks are among the most heavily shorted of financials.

Selling the most heavily owned, and it looks like short covering in the most heavily shorted.

This looks like hedge funds are unwinding positions in financial stocks.

Why would they do that? From what I have heard, hedge fund performance has been horrendous recently--particularly last week. Guys are now being forced to take down gross exposures.

Some analysts are already trying to get out ahead of this story. Morgan Stanley, in a note from its London office this morning, repeated a similar mantra: Buy defensives, sell cyclical and financials. They noted that: "Defensives tend to outperform most when growth indicators are rolling over. Telecom, Staples and Health do best on a 6-month view."

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