Part of me hesitates to say anything that might be construed as “directional” ahead of mega-cap earnings in the US.

Depending on how it goes for the six “Magnificent 7” members which report over the next several sessions, the “broad” (a misnomer in this context) market could continue to stabilize, rapidly recouping recent losses on the way to new records, or careen back lower again erasing what, headed into Tesla’s results on April 23, was a strong two-day rebound.

With that caveat, I did feel compelled to highlight the updated figures below from Nomura’s Charlie McElligott, who on Tuesday noted that skew and vol were mean reverting into mega-cap earnings.

The steepening (skew) / expansion (vol) witnessed during the mini-pullback in US equities is disappearing, and rapidly so.

Last week’s story was that demand for hedges was outstripping (or at least offsetting) vol supply, but that dynamic might be old news already.

On the eve of Magnificent 7 results, vol sellers reemerged “looking to exploit the recently rich levels of iVol / Skew / Put Skew / vVol,” which were all “breaking lower for the first time in weeks,” McElligott wrote.

Have a look at the figures below, which show the seasonal for correlation (on the left) and realized (on the right).

There’s no mystery there: The micro matters more during earnings season, or at least it should in theory, as beats and misses lead to divergent performance and thereby lower correlation. That, in turn, is conducive to suppressed index-level vol.

“We have hit the part of the seasonality where SPX realized correlation begins to crater” into the “winners and losers dispersion” of earnings season, Charlie went on.

Note the correlation uptick headed into this week’s deluge of reports — i.e., the red line in the left-hand figure above. That’s the macro (i.e., geopolitical turmoil and the hawkish front-end rates repricing) doing its “Corr 1” thing. And as McElligott noted, it probably looked like a good sell on the hypothetical catch down to the earnings seasonal.

If that catch down pans out in line with history, we could (could, with emphasis) see realized vol reset lower over the next week or four.