Tuesday, August 11, 2026

Market Regime

RISK-ON is the regime engine's read, the same regime as the prior published entry of 2026-08-10. This is consecutive RISK-ON print #6 on the public ledger (n=6). Breadth gave back part of the prior recovery: 67.3% of the universe (656/975) trades above its 200-EMA, down from the prior count and still scoring healthy. SPY closed 773.02, +9.6% over its 200-EMA of 705.43. VIX at 14.9 sits in the calm band, lower again than the prior read. Rates reversed direction: the 10Y rose 9bps WoW to 4.72% and the 2Y rose 7bps to 4.25%, widening the 10Y–2Y spread by 2bps to 0.47%. Breakevens rose 7bps to 2.29% while the real 10Y added 2bps to 2.43%. HY tightened another 5bps to 2.70%. Claims stand at 199K (+1K WoW, as of 2026-08-01). FRED market prints carry an as-of date of 2026-08-10 except where noted.

Key Macro Reads (real data)

Regime Assessment

Measured: the engine classifies RISK-ON and every input sits inside its favourable band. Inferred: the two-week pattern in breadth is now a wobble in both directions rather than a trend in either. The count fell to 656/975 after recovering to a higher level on the prior read, so participation has oscillated across three observations without establishing a direction. A classification that survives that oscillation is being carried by inputs other than breadth chiefly credit, which has tightened on every observation in this sequence.

The rate decomposition inverted, and that matters more than the direction of the move. Last week's decline was led by the real rate; this week's rise is led by inflation compensation, with breakevens adding 7bps against 2bps at the real 10Y. The easing-signature reading that two prior observations supported does not survive its own reversal the same decomposition logic, applied here, points at repricing of inflation expectations instead. Neither reading has any labor or activity confirmation on this sheet. The curve steepened 2bps to 0.47%, which is consistent with the front end lagging the back end rather than with any distinct growth signal.

Geometry is marginally less extended than the prior read: +9.6% above the 200-EMA against +9.7%, on a lower VIX. That combination a slightly smaller cushion and cheaper insurance describes complacency more precisely than it describes strength. Six prints remain a short series confined to one window, and no observation in it has been taken during a volatility expansion or a credit widening.

What Would Invalidate

• HY at 2.70% tightened a fifth observation running, 5bps this time versus 15bps last. The deceleration is the thing to watch; a widening print removes the input doing the most work in this sequence.
• Breadth at 67.3% (656/975) fell back below the prior count. A third consecutive lower count would convert the oscillation into a downtrend and make participation the dissenting leg.
• SPY at 773.02 is +9.6% above its 200-EMA of 705.43. Compression of that cushion while breadth continues to fall removes the price leg.
• VIX at 14.9 has declined across the sequence. Expansion out of the calm band strips the one input common to all six prints.
• The 10Y at 4.72% and 2Y at 4.25% both rose; the spread widened to 0.47%. A continued 10Y-led rise that pushes the spread materially wider would test whether an equity regime built on falling rates holds when rates rise instead.
• The 2.29% breakeven rose 7bps against 2bps at the 2.43% real 10Y. If breakevens keep leading, the inflation-repricing reading displaces the policy reading and the front-end path repricing becomes the risk.
• Claims at 199K (as of 2026-08-01) rose 1K. A sustained climb supplies a labor cause none of the current inputs anticipate.

Forward Catalysts

• Credit: whether HY holds 2.70% after five tightening observations, and whether this week's slowdown from 15bps to 5bps is the start of the run flattening out.
• Breadth: whether the 656/975 count stabilises or prints a third lower reading.
• Rates: whether the reversal to +9bps at the 10Y extends, and whether breakevens keep leading the real rate for a second observation.
• Labor: claims (199K, as of 2026-08-01), unemployment (4.1%) and payrolls (158.9M) are all stale relative to the market inputs; the next prints are the first chance for the labor side to confirm or contradict the rate move.

Status

RISK-ON, print #6 on the public ledger; same regime as the prior read of 2026-08-10.

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