By now, regular readers are well apprised of the extent to which the August “whiplash” on Wall Street was yet another example of the combustible interplay between a fundamental catalyst (in this case a short-lived growth scare) and modern market structure.

A few days ago, I walked through the flows behind the fireworks. First thing this week, I spent some time editorializing around the outlook for additional re-risking, re-leveraging and re-allocation in equities from the same sources, namely first-mover CTAs and vol control strats.

But when it comes to investor fascination with modern markets, there’s a “more cowbell” dynamic: Reader interest never wanes. I say “good” to that, not because it gives me something to write about (that too), but rather because during acute episodes, these flows have quite a bit of explanatory power vis-à-vis the mercurial movements of the lines on your monitors.

With that in mind, note that vol-of-vol receded back below 100 this week for the first time since the shock. Recall that VVIX breached 190 at the highs this month, levels only witnessed previously in the most harrowing of circumstances.

The fade back below 100 is indicative of waning demand for tail hedges and “de-stressing” more generally.

The post-August 5 vol crush precipitated “an absolutely remarkable snapback in spot equities,” Nomura’s Charlie McElligott wrote Tuesday, recapping recent events. “The prior forced-sellers from the vol-sensitive systematic space have begun turning buyers again,” he added.

Estimates of that buying vary, but on Nomura’s math, CTAs have re-bought some $36 billion of global equities since August 6 (figure on the left, below), while vol control chipped in around $5 billion.

Note from the table on the right that vol control re-allocation will pick up steam moving forward as long as the distribution of daily spot outcomes doesn’t expand too much. In the green box, you can see the estimates: If the market averages a 0.5% daily move, target vol would be in for more than $50 billion looking out over the next month.

(As quick, but amusing, aside, the bid from leveraged ETFs since the August 5 lows nearly matched CTA buying across equities, at an estimated $35 billion.)

Remember: Vol control de-leverages and re-allocates with a delay. Escalations (i.e., spot outcome distribution expansions) and de-escalations (outcome distribution compressions) create a latent sell/buy impulse as the reset higher/lower in trailing realized will trigger de-leveraging/re-leveraging on a lag. Of course, the vol reset earlier this month was historically fast, which meant faster-than-usual de-leveraging. Once that spike subsides — more precisely, once it falls out of the lookback — that cohort will be buying in size.

“For vol control, the mathematical fact is that the imminent realized vol rollover will see massive reallocation buying in the weeks and months ahead on [a] resumption of smaller daily market ranges, as trailing rVol windows will collapse in the absence of further shocks,” McElligott went on.

If you’re curious as to how meaningful these synthetic short gamma flows really are (or can be, depending on market conditions), note that on Tuesday, every 100bps to the upside/downside would’ve been good/”bad” for ~$7 billion as per the table below.

CTAs are less impactful now: As Goldman’s Scott Rubner noted on Monday, and as Charlie spelled out Tuesday, they’ve reestablished their signals (i.e., re-leveraged after the price action drove spot back up through key thresholds). Their job is done here, so to speak.

Oh, and as ever, the monetization of downside hedges into the selloff — i.e., “Look! A real pullback! Sell-to-close! It’ll be gone by 4!” — was fuel on the recovery fire. As McElligott explained for the umpteenth time, the monetization of downside hedges “work[s] to spin off positive delta,” which is to say you get “bought-back” equities shorts and “sold” VIX longs as dealers burn their own superfluous hedges into the customer monetization rush, “further enabl[ing] the virtuous recovery.”