Buyers are still higher in equities. Perhaps you noticed.

The S&P headed into the US afternoon on track Thursday for a 14th all-time high in 22 sessions.

Not too bad when you consider the general state of things geopolitically, and particularly the fact that we’re experiencing an “unprecedented” oil supply shock, as the IEA put it mid-week.

There’s the chart. It’s just record after record after record. Every day. Almost literally.

I’ve been over the “melt-up dynamics,” if you will, on multiple occasions over the last two weeks (see here and here for example), so I won’t recap those talking points specifically.

But I did want to briefly highlight some new color from (everyone’s favorite) Charlie McElligott, who on Thursday spent some time editorializing around the spot-up, vol-up regime that tends to accompany melt-ups.

The figure below gives you a sense of the how far afield we are in terms of the regression for big-tech returns and implied vol.

As you can see, this is anomalous even as “SUVU” regimes go.

“In a world where so few had the rally on, the equities skew / put skew collapse and absolutely hilarious steepening in call skew shows the spot-up, vol-up panic-grab for upside,” Charlie wrote.

That’s real negative gamma, and as McElligott emphasized, it feeds a self-fulfilling prophecy by knocking into what he aptly describes as sources of “synthetic” negative gamma.

The figure below shows you the read-across for rebalancing flows from ballooning AUM in the leveraged ETF space.

Remember: 85 cents of every AUM dollar in those products is tech, “tech” (with scare quotes), semis or what I call “AI adjacents.”

“The aggregate rebalancing of the daily performance dynamics has meant $100 billion of buying [from leveraged ETFs] over the trailing one-month period,” McElligott said. The breakdown on that is more than $38 billion to semis, around $42 billion to tech and nearly $12 billion to the Mag7 specifically.

That’s “all contributing to a world, as I like to say, where ‘buyers are higher,’ capitulating back into the market and buying more the higher we go, again driven by both these real and synthetic sources of negative gamma, which act pro-cyclically and feed the upside momentum,” he went on.

The figures above show you three-month vol in the semi ETF and the top-10 largest names by market cap.

“What’s funny is, people keep saying how vol seems too low [because they’re] looking at the absolute level of VIX, or 20-day SPX realized vol at 10, but they’re missing the spot-up, vol-up from the chase into calls,” Charlie said.

Of course, the risk is always the same in these set-ups: SUVU can be unstable. As McElligott put it Thursday afternoon, “‘The bigger they are, the harder they fall’ as the math is the math: In a scenario with this much options delta needing to be traded, it’s going to make for really, really large notional on a drawdown into whatever the pullback catalyst is.”