Wednesday, August 12, 2026

Market Regime

RISK-ON is the regime engine's read, the same regime as the prior published entry of 2026-08-11. This is consecutive RISK-ON print #7 on the public ledger (n=7). Breadth slipped again: 66.5% of the universe (649/976) trades above its 200-EMA, a lower count than the prior read and still scoring healthy. SPY closed 770.52, +9.1% over its 200-EMA of 706.03. VIX at 15.46 sits in the calm band, higher than the prior read. Rates mostly stalled: the 10Y added 1bp WoW to 4.70% while the 2Y fell 3bps to 4.22%, widening the 10Y–2Y spread 4bps to 0.48%. Breakevens rose 1bp to 2.27%; the real 10Y was flat at 2.43%. HY widened 1bp to 2.72%. Claims stand at 199K (+1K WoW, as of 2026-08-01). FRED market prints carry an as-of date of 2026-08-11 except where noted.

Key Macro Reads (real data)

Regime Assessment

Measured: the engine classifies RISK-ON and every input remains inside its favourable band. Inferred: the leg that carried the classification through the breadth wobble has stopped helping. Credit tightened on each observation of the prior run; this print widened 1bp. One basis point is noise, but it ends the streak, and the sequence no longer has an input improving on every observation. What remains is a classification held up by levels rather than by direction.

The second breadth decline in a row changes the shape of that series. Oscillation across three observations was ambiguous; two consecutive lower counts, 649 of 976 after 656 of 975, is the beginning of a direction rather than a wobble beginning, because two points establish nothing on their own. Participation is now the leg most likely to dissent first, and there is no labor or activity data on this sheet dated later than 2026-08-01 to argue with it.

Rate movement was near-nil at the back end and the decomposition went quiet with it: 1bp on the 10Y, 1bp on breakevens, nothing on the real rate. Last week's inflation-repricing reading has no fresh evidence either way. The steepening to 0.48% came almost entirely from the 2Y falling 3bps a front-end move, which is where policy expectation shows up first, though a single 3bp print carries no policy conclusion on its own. Geometry compressed to +9.1% above the 200-EMA from +9.6%, and VIX rose to 15.46. A smaller cushion on more expensive insurance is the first read in this sequence where both moved against the position of strength at once. Seven prints in one window, none of them taken during a volatility expansion or a genuine credit widening, remains a short series.

What Would Invalidate

• HY at 2.72% widened 1bp, ending the tightening run. A second widening print, particularly one of 10bps or more, removes the input that carried the earlier prints.
• Breadth at 66.5% (649/976) is the second consecutive lower count. A third would establish participation as a downtrend rather than a two-point line.
• SPY at 770.52 is +9.1% above its 200-EMA of 706.03, down from +9.6%. Continued compression alongside falling breadth removes the price leg.
• VIX at 15.46 rose off the prior read for the first time in this sequence. A move out of the calm band strips the one input common to all seven prints.
• The 2Y at 4.22% fell 3bps while the 10Y at 4.70% was flat, steepening the spread to 0.48%. A continued front-end-led steepening would need a labor or activity print to distinguish policy-path repricing from growth deterioration; none is available dated after 2026-08-01.
• The 2.27% breakeven and the 2.43% real 10Y both went quiet. A resumption of breakeven-led moves revives the inflation-repricing reading; a real-rate-led move revives the policy one. Flat prints resolve neither.
• Claims at 199K (as of 2026-08-01) rose 1K. A sustained climb supplies a labor cause the current inputs do not anticipate.

Forward Catalysts

• Credit: whether the 2.72% HY print is a single-basis-point pause or the turn, and how the next observation resolves it.
• Breadth: whether the 649/976 count prints a third consecutive decline or stabilises.
• Rates: whether the 2Y keeps leading the curve steeper from 0.48%, and whether the back end stays near 4.70%.
• Volatility: whether VIX at 15.46 holds inside the calm band after its first increase in this run.
• Labor: the next ICSA release against the 199K reading of 2026-08-01, the only high-frequency activity input on this sheet.

Status

RISK-ON since the ledger's current run began; consecutive print #7, same regime as 2026-08-11.

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