BTIG's Julian Emanuel warns another deep market pullback is coming despite Monday's comeback.
The firm's chief equity and derivatives strategist sees evidence in trading activity that retail investors are still over-exposed to the market's high flyers.
"Rather than fear being priced in the options market, there's fear of missing out. The price of out of the money calls, as was the case throughout August, is still trading at a premium to the price of out of the money puts," he told CNBC's "Trading Nation" on Monday. "That is a very abnormal position."
According to Emanuel, the situation indicates frothy sentiment.
"That tells us that the public is still very committed — as are the large institutional investors," he added.
Emanuel believes the backdrop makes stocks vulnerable to downside bigger than a "garden variety pullback."
He estimates the tech-heavy Nasdaq would fall 15% to 20% from its all-time high hit on Sept. 2. After bouncing back on Monday from its worst week since March, the index is now off more than 8% from its record level.
Emanuel predicts the broader S&P 500 would drop 10% to 15% from its all-time highs because mega cap growth stocks, including Apple, account for such a big portion of it. The index is about 6% off its record high.
He expects a second wave of selling will come before the Nov. 3 presidential election.
"Markets tend to be very uncomfortable with uncertainty," said Emanuel. "When you look at the election, it's clear that the rhetoric is going to get nastier."
Emanuel addressed pullback risks during his 'Trading Nation" in early August, too. He warned a bubble was brewing in big tech. Less than four weeks later, many of those high flyers dropped into correction territory.
Despite his discouraging forecast, Emanuel contends the bull market is alive. He expects the market to stabilize and a healthy rotation into beaten down economically sensitive stocks will prevail by next year.
"It really comes down to this whole idea particularly of the economy reopening," Emanuel said. "A lot of the stocks that drove the rally in July and August are the ones that benefited from, for lack of a better word, the Covid trade."