Wall Street snapped its best win streak of 2024 on Tuesday, when the S&P slipped a whole -0.20%.

Had the benchmark of all benchmarks managed one more gain, US equities would’ve boasted their longest stretch of wins in two decades. Alas.

Still, the momentum’s with the bulls. Quite literally. As documented here twice in the last 48 hours, CTAs were a meaningful source of demand over the past two weeks, as stocks rebounded sharply off the August 5 panic lows. Trend-followers accounted for more than $35 billion of buying in global equities on one bank’s estimates. As a market participant told Bloomberg Tuesday, “the momentum guys are driving the bus.” Do note: When markets are thin, as they are in August, those flows are more impactful.

Should spot continue to move higher, it could create a self-fulfilling prophecy. Colloquially: A melt-up. This is some pretty heavy (read: technical) stuff for a sleepy day in late August, but consider the figures below from — you guessed it — Nomura’s Charlie McElligott.

You want to focus on the neon green shaded area in the top pane, and the extent to which there’s no “wall” there. As Charlie put it in his annotation, it’s a “vacuum.” What that means, in layman’s terms, is that if spot equities (i.e., the S&P) makes it up beyond 5650 or so, the road’s clear to 5750. With no “insulation” there, that move could feel energetic, to employ a euphemism.

“If we were to see spot index rally further, it’s possible that the market then trades ‘spot up, vol up’ with overwriters eating their own tails… creat[ing] some FOMO ‘chase’ up to the big dealer long call position at 5750,” McElligott wrote, describing a scenario where call-sellers see spot blow through their short strikes. Note from the bottom pane that nearly all of the gamma keeping things “contained” right above SPX 5600 is front-week — it’s about to roll off. And into a whole bunch of catalysts.

McElligott described a potential clean-sweep bull scenario, and suggested it’s actually a bit scary given how unstable “spot up, vol up” markets tend to be. “Almost frighteningly, there is some delta on a bullish best-case scenario parlay where you could 1) get through Jackson Hole while maintaining the market’s current Fed implied pricing, 2) NVDA earnings hold the line next week, 3) the upcoming NFP and CPI prints maintain ‘Goldilocks’ / ‘soft landing,'” he wrote.

If all those boxes get checked in succession, we could see stocks “raging into September Op-Ex,” Charlie went on.

That’d be just in time for the late-September seasonal which, you’re reminded, is quite challenging. Specifically, it’s the worst two-week stretch of the year for stocks. By then, over-exposed investors would presumably have downside hedges on, creating the steeper skew and dealer positioning setup you need for a big “whoosh” lower (see the red annotation on the bottom pane above).