Yesterday, when the Dow was more than 400 points and traders were shaken by what appeared to be a market that could not bounce no matter the newsflow, Nomura's Charlie McElligott - who had correctly foreseen last week's market slide - made a contrarian forecast: due to dismal positioning by CTAs and fund, he warned the next move was likely an explosive "blast to the upside."

Less than 24 hours later, and 700 Dow points higher, this prediction has come true, and much more may be coming according to McElligott's latest note.

First, a snapshot of where we currently stand.

As already covered earlier, futures are "smocking" higher this morning following overnight news of a call between Chinese Vice Premier Liu He and US Treasury Sec Mnuchin and Trade Rep Lighthizer to discuss timetables and “road map” on trade talks, followed by a report that China is set to "move on US car tariffs", both of which ramped risk assets and sent spoos above yesterday's higher, triggering stop-losses from dynamic hedgers with and more than 80 handles higher from yesterday's lows.

Adding to the suddenly euphoric mood is the drop in the dollar, which is boosting commodities, emerging markets and inflation expectations, while higher Treasury yields are also forcing a modest rotation into risk, with the Eurodollar curve steepening, a "further indication that the worst of the Rates “stop-outs” are behind us."

Fundamentals are also in the bulls' favor: i) the Fed’s dovish pivot further eases “forward-guidance” while also removing the “policy-error” left-tail scenario as well, ii) US financial conditions have actually EASED via the curve’s recent / power bull-flattening; iii) financial conditions are likely to “ease” even more going-forward with increasingly limited US Dollar upside into 2019 and beyond; iv) the weaker dollar drives a “virtuous” feedback loop of firming Commodities (with US Ags as further catalyst on Chinese resumption of buying as trade-war “olive branch”), in turn boosting the S&P’s largest positive macro factor sensitivity being US (higher) inflation expectations.

But while the newsflow and fundamentals are surely setting up the market for a nice move higher - absent any more executive arrests of course - it is positioning that remains the big wildcard and the key catalyst for a potential move higher.

As McElligott explains, continuing the correct argument he first laid out yesterday, "the tactical positioning dynamics are now even more acute, as both Systematic Trends have (as documented here yesterday) again pivoted “max short” Fri / Mon across most global Equities index futures, while Fundamental funds have been in “net-down” mode by selling longs and “grossing-up” shorts in single name / ETF and index futures—in turn, creating the kindling for a massive short-squeeze over the next month via both this implicit- and explicit- “negative gamma.”

And just in case it was unclear - especially for various other Wall Street "quants" who have taken offense...