I hesitate to weigh in on the near-term trajectory of… well, of anything, really. Tomorrow’s not promised, after all.

I’ve spent a lot of time — too much, probably — thinking about that recently. I realize this is completely contradictory and thereby nonsensical, but sometimes I’m more confident in the notion that I’ll live another 15 years than I am that I’ll live another 15 days.

Now that we’re (accidentally) on the subject, I still suspect I might’ve died in 2011. That this is limbo. Maybe you’re all figments. I’ve said it over and over again: My present tense is illusory; only memories are real and tangible. (Fess up! You’re all ghosts aren’t you?!)

Anyway, opining on the near-term path of a notoriously squirrelly asset like equities isn’t for the faint of heart. If you ask the ghost of Charlie Munger, it’s not for anybody. Because it’s futile. But if anyone’s proven over the years that it’s at least worth trying, it’s another Charlie. Nomura’s Charlie McElligott.

The figures below, from a Tuesday McElligott note, show you the “zoom” potential (red boxes, dashed green arrow) for equities in the event spot rallies into and through upside call strikes dealers are short to clients.

I realize a lot of that’s Greek (figuratively and literally), so in layman’s terms: If the S&P were to make it to ~6100 and beyond, market maker hedging activity tied to call options they sold to clients would amplify the upside move, all else equal.

Note also the green box in the top pane. That shows you the distribution of long gamma tied to client overwriting in and around spot (i.e., at-the-money). Hedging activity tied to those options will work to moderate directional moves, all else equal, but as McElligott wrote Tuesday, there’s a risk that Trump “TACOs” (that’s a verb here) on the way up.

What does that mean? It means that rather than use recent equity strength as an excuse to re-escalate trade tensions, Trump might instead add fuel to the rally by, for example, touting “progress” with China. Or lifting export controls in exchange for promises that Beijing will stop throttling rare earths.

“TACO” is, of course, the market acronym for “Trump Always Chickens Out,” where “chickens out” means Trump’s penchant for announcing stock-friendly tariff news when equities fall too much. If he were to announce market-friendly tariff news when stocks are already rallying, that’d be Trump chickening out even in the absence of something (equity weakness) to be scared of. And it’d presumably facilitate a melt-up. An ice cream TACO. Or something.

In that scenario, spot could move through clients’ sold-call strikes (i.e., bust through any upside “insulation”) and then into dealers‘ sold-call strikes (i.e., igniting the short gamma kindling and activating the “accelerant flow” from Charlie’s annotation).

“The ‘Trump collar’ has simultaneously contributed to the recent compression in realized vol [and] also now in real-time is building the risk for ‘wingier’ outcomes, as the assumptions of the collar create lazy conditioning… which can then get stopped-through with a modification in the expected or anticipated behavior,” McElligott said.

That’d be set against a backdrop where the macro consensus among many market participants is still bearish, a state of affairs which likely means most folks don’t have enough upside exposure, and certainly not enough to avoid under-capturing in a full-on melt-up.

“As I’ve been saying for a while now, there’s a greater risk of a right-tail equities move at this juncture, because nobody owned it for the vast majority of the first two months post-‘Liberation Day,'” McElligott went on, adding that “a right-tail, ‘thread-the-needle’ macro outcome holds real delta” now, putting the market’s “embedded economic skepticism” at risk of being caught flat-footed and forcing investors to chase.