The Market Brief

With little on the calendar for the rest of the week and volumes thinned by the holiday, traders are turning to two catalysts next week: Nvidia Corp.’s earnings, for a fresh read on the AI buildout, and remarks from Federal Reserve Chairman Kevin Warsh at the Jackson Hole symposium. Warsh’s lack of guidance on if or when the Fed will adjust rates has only added to uncertainty over the policy outlook.

Options traders spent late July scrambling to hedge against a selloff. Weeks later, the same market was chasing gains higher, and the reversal in how risk gets priced shows up clearly in one chart.

Skew measures the implied volatility gap between out-of-the-money puts and calls, here using the S&P 500’s 25-delta one-month options. Elevated skew signals demand for downside protection; a collapse points to chasing calls higher instead. The chart shows skew spiking in late July as traders hedged against a selloff, then dropping sharply in recent weeks amid FOMO-driven demand for upside calls, with the shaded bar marking a stretch of flip-flops in the curve.

The reversal reflects how concentrated positioning has become around momentum. With dealers currently short gamma, market makers buy into rallies and sell into declines, amplifying moves that owe more to crowded positioning than to shifting fundamentals.

In todays brief we break down a failed breakout and the pattern now repeating with a twist. We walk through what’s different this time, and why the setup points to a higher risk environment ahead.