When should you throw in the towel on the equity rally? Not on August 5, as it turns out, hindsight being 20/20 and such.

The Sahm rule trigger was a false alarm (just ask Claudia) and the vol shock was a dealer stop-in (a convexity event from legacy short VIX call positions). In other words: The growth scare and the appearance of a market panic were a bit of a Fata Morgana. Hence the quick fade.

As Nomura’s Charlie McElligott put it, describing the turnaround in equities and accompanying vol smash, this was “the fastest, largest-magnitude resumption of ‘short-the-vol-rip, buy-the-spot-dip’ mean-reversion ever witnessed.” Long story short, this wasn’t the “big one” (Elizabeth).

But if you ask JPMorgan’s Thomas Salopek and Maggie Zhong, it might’ve been a “dress rehearsal.” “Many market participants are dismissing the recent blowup of various crowded trades as a fluke or flash crash, but we see it as more of a dress rehearsal for what’s to come,” they wrote, in a note called “After the dust has settled.”

For Salopek and Zhong, it was the combination of the Sahm siren and carry trade headlines which ultimately spooked markets — there was a “multiplicative effect, with markets unable to deal with both at once,” they wrote, on the way to suggesting that in the end, the Sahm rule probably still holds, just at a “higher threshold.”

While editorializing around the quick snapback for equities and vol, JPMorgan’s strategists reminded investors that “volatility is a wasting asset.” That simple point is absolutely crucial, but it’s often — err — wasted on market participants. Vol will recede — as in, deterministically — in the absence of new shocks. That, Salopek remarked, will “tempt investors to re-establish [risk positions] at better levels.”

The chart above’s straightforward: Correlation, which spiked dramatically off record lows during this month’s fleeting fireworks, fell back rapidly, suggesting reengagement with the dispersion trade (one source of short index vol supply) even as traders seem a little gun shy with the yen.

“The carry trades could eventually become a problem again, but with investors getting burned, not everyone will be reinstating these trades, so it ought to be more difficult to hit the old highs,” JPMorgan said.

So, in the presence of such a low signal-to-noise ratio, what would constitute an unequivocal sign that the party’s over? For JPMorgan, the answer’s simple: An SPX breach of the 200-day.

As the language in the chart header suggests, Salopek and Zhong were unequivocal: It’s over if the S&P slips below support.

“It is a fine plan to try to range-trade, so long as [we’re] above the 200-day,” they wrote. But that’s the “line in the sand,” and not just for trend-following managed futures strats. It’s “a demarcation of the business cycle.”

It’s “reasonable,” JPMorgan’s team went on, to get “long risk” with the index above the magic line. “But there is no looking back should we dip below it.”