It's probably not a coincidence that in the same week in which one of the most level-headed investors of all, Oaktree's Howard Marks issued an alarm on the current state of the market, that JPM has come out with not one (as discussed previously, Marko Kolanovic's latest "tipping point" note last Thursday was blamed for the small and sharp selloff at the end of last week), but two reports in which JPMorgan makes it clear that not only is the market on the edge, but increasingly more traders, both institutional and equity, are getting ready for what comes next.

First, as another reminder, these are the 4 bullet points with which Marks summarized the current investing environment:

The uncertainties are unusual in terms of number , scale and insolubility in areas including secular economic growth; the impact of central banks; interest rates and inflation; political dysfunction; geopolitical trouble spots; and the long-term impact of technology.

, scale and insolubility in areas including secular economic growth; the impact of central banks; interest rates and inflation; political dysfunction; geopolitical trouble spots; and the long-term impact of technology. In the vast majority of asset classes, prospective returns are just about the lowest they’ve ever been.

Asset prices are high across the board. Almost nothing can be bought below its intrinsic value, and there are few bargains . In general the best we can do is look for things that are less over-priced than others.

. In general the best we can do is look for things that are less over-priced than others. Pro-risk behavior is commonplace, as the majority of investors embrace increased risk as the route to the returns they want or need.

One day later, Kolanovic added fuel to the fire, warning that with volatility at record lows, the upcoming mean-reversion will leave many in ruin, and that while there is still time to get out of the market, "we may be very close to the turning point":

"In what is akin to the law of ‘communicating vessels,’ once inflows in bonds stop, funds are likely to start leaving other risky assets as well, including equities. The FOMC statement yesterday alleviated immediate fears – normalization of balance sheet will start ‘relatively soon,’ but only if ‘the economy evolves broadly as anticipated.’ This reasonably dovish stance pushes this market risk out for a few weeks (the next ECB meeting is Sep 7th, Fed Sep 20th, BoJ Sep 21st). This gives volatility sellers and other levered investors a limited window to position for a seasonal pickup in volatility and central bank catalysts in September."

Not one to mince his words, the JPM head quant then compared the current period to the period just before 1987's Black Monday, warning that "strategies that boost leverage when volatility declines, such as option hedging, CTAs and risk-parity, share similar features with the dynamic ‘portfolio insurance’ of 1987,” which “creates a ‘stop-loss order’ that gets larger in size and closer to the current market price as volatility gets lower.” Finally, from a timing standpoint, he said that as growth in short-vol strategies suppresses both implied and realized volatility, and with volatility at all-time lows “we may be very close to the turning point.”

* * *

Over the weekend, in yet another note from JPM, this time from the bank's "flow" expert, Nikolaos Panigirtzoglou, he writes that none of the above should come as a surprise and that as a result, investors - both institutional and retail - have started putting hedges against an equity crash.

Among the market feature he highlights is that the current put to call open interest ratio for S&P500 index options has been rising for most of this year, and that while this ratio had peaked in June and its current level is not extremely high, it nevertheless stands above its post 2014 average. What is more extreme, is the call to put open interest ratio for VIX options, which at almost 4.0, is close to historical highs.

To Nikolaos, the combination of these two observations implies that "there is greater demand for hedging against equity tail risk or a volatility spike relative to hedging against a typical equity market correction."

In other words, there is just the right amount of hedging for a crash. And it's not only institutional investors who are hedging. Retail investors have been also hedging.

Here are the details from Panagirtzoglou's latest letter: