Journal ·
Thursday, 16 July 2026
Regime Risk-onMarket regime
Risk-on carries, print #19 in the journal and one session on from the 07-15 read. VIX rose to 16.73, still beneath the ~18 gate but with less cushion than yesterday's calmer print. Breadth reads 64.4% (628/975) above the 50-day EMA, a healthy majority that improved by 3.5 points. SPY closed 750.87, +8.0% over its 200-EMA of 695.37. The curve steepened from the front: the 2Y dropped 8bps to 4.13% while the 10Y held near flat at 4.55% (−1bps), widening the 10Y–2Y spread 7bps to 0.42%. Inflation expectations sat still, breakeven −1bps to 2.23% and the real 10Y flat at 2.32%. Credit gave a marginal 2bps, HY at 2.71%, still tight in absolute terms.
Key numbers
| Metric | Level | Read |
|---|---|---|
| Regime | Risk-on | Consecutive print #19, continuation from 07-15 |
| VIX | 16.73 | Calm, cushion narrowed below the ~18 gate |
| Breadth >50-day EMA | 64.4% (628/975) | Healthy majority, improved 3.5 points |
| SPY close | 750.87 | +8.0% vs 200-EMA (695.37) |
| 10Y Treasury | 4.55% | week over week −1bps |
| 2Y Treasury | 4.13% | week over week −8bps, front-end rally |
| 10Y–2Y spread | 0.42% | week over week +7bps, steepening |
| 10Y breakeven | 2.23% | week over week −1bps |
| Real 10Y rate | 2.32% | week over week flat |
| HY credit spread | 2.71% | week over week +2bps, wider |
| Fed Funds | 3.63% | as of 1 June 2026 |
| Initial claims | 208K | week over week −8K (as of 11 July 2026) |
| Unemployment | 4.2% | as of 1 June 2026 |
| Nonfarm payrolls | 159.0M | as of 1 June 2026 |
| Housing starts | 1,177K | as of 1 May 2026 |
Regime assessment
The front-end rally is the tell this week. A 2Y down 8bps against a pinned 10Y is the market pulling cuts forward, and that shape supports risk rather than punishing it no duration signal isolates the highest-multiple narratives here. VIX rising to 16.73 thins the cushion but stays under the gate, and HY at 2.71% stays tight enough to keep credit off the worry list. The give is small and cosmetic: VIX ticked up about a point, HY leaked 2bps. None of it reprices the tape. The standing discipline holds gate fresh high-conviction adds behind a catalyst or a clean setup, not on strength alone, with SPY now 8.0% extended over its 200-EMA.
What would change the call
- VIX at 16.73 narrowed its cushion, and a push above ~18 re-arms the vol gate and tilts the read to caution.
- Breadth at 64.4% keeps a healthy majority; participation under 50% flips the regime faster than any single macro print.
- HY at 2.71% is tight but leaked 2bps; an accelerating move wider strips out the cleanest confirm and drags the read toward neutral.
- The 0.42% spread is steepening on a falling 2Y; if the front-end move reverses into a bear-flattening, the cut narrative supporting risk unwinds.
What to watch
- Next CPI against a 2.23% breakeven: a hot print reverses this week's flat inflation leg and pressures duration.
- Labor: claims fell to 208K (−8K week over week, as of 11 July 2026), firm; the test is whether the 159.0M payroll trend and 4.2% unemployment hold into the next release.
- The HY path from 2.71%: whether this 2bps give extends or reverses is the fastest route to re-rating credit.
- Fed path against a 3.63% funds rate, with the 2Y at 4.13% pricing cuts not yet delivered the front end is the pressure point.
Status
Risk-on since 18 June 2026; consecutive print #19 in the journal, continuation of the 15 July 2026 read. Research only no positions, sizes, entries, stops, or P&L.