Journal ·
Friday, 17 July 2026
Regime Risk-onMarket regime
Risk-on holds, consecutive print #20 in the journal and a continuation of the 07-16 read. VIX rose to 18.77, sitting just above the ~18 gate and elevated against the prior session's calm read. Breadth slipped to 59.9% (584/975) above the 50-day EMA, a healthy but marginal majority that lost better than four points. SPY closed 743.28, +6.8% over its 200-EMA of 695.98. The front end led the curve again: the 2Y eased 5bps week over week to 4.16% while the 10Y ticked up 1bp to 4.57%, widening the 10Y–2Y spread 6bps week over week to 0.41%. Inflation expectations drifted lower, breakeven −2bps to 2.22%, while the real 10Y firmed +3bps to 2.35%. Credit gave a marginal 2bps week over week, HY at 2.71%, tight in absolute terms.
Key numbers
| Metric | Level | Read |
|---|---|---|
| Regime | Risk-on | Consecutive print #20, continuation from 07-16 |
| VIX | 18.77 | Elevated, just above the ~18 gate |
| Breadth >50-day EMA | 59.9% (584/975) | Healthy but marginal majority, narrowed by four-plus points |
| SPY close | 743.28 | +6.8% vs 200-EMA (695.98) |
| 10Y Treasury | 4.57% | week over week +1bps |
| 2Y Treasury | 4.16% | week over week −5bps, front-end easing |
| 10Y–2Y spread | 0.41% | week over week +6bps, steepening |
| 10Y breakeven | 2.22% | week over week −2bps |
| Real 10Y rate | 2.35% | week over week +3bps |
| 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 | 1,427K | as of 1 June 2026 |
Regime assessment
Thinning participation is the read this week. Breadth slipping to 59.9% means a majority of the tape is still doing the work, not a thin bid under the index leaders, but the margin is now marginal rather than durable. VIX at 18.77 puts volatility back on the constraint list, just above the ~18 gate, so the read tilts toward more defensive sizing. The front-end easing keeps the rate-cut narrative underneath the highest-multiple stories rather than fighting them. The give is minor and mixed: real yields firmed +3bps and HY leaked 2bps, neither enough to reprice anything. What warrants restraint is stretch as well as stress SPY is 6.8% over its 200-EMA, so the standing rule stands: gate fresh high-conviction adds behind a catalyst or a clean setup, never on strength alone.
What would change the call
- VIX at 18.77 has no cushion left: it already sits above ~18, which re-arms the vol gate and tilts the read to caution.
- Breadth at 59.9% is still a confirm but a marginal one; participation slipping under 50% flips the regime faster than any single macro print.
- HY at 2.71% is tight but leaked 2bps week over week; an accelerating move wider strips out the cleanest credit confirm and drags the read toward neutral.
- The 0.41% spread is steepening on a falling 2Y; a reversal of the front-end move into bear-flattening unwinds the cut narrative supporting risk.
What to watch
- Next CPI against a 2.22% breakeven: a hot print reverses this week's softer inflation leg and pressures duration as the real 10Y already firmed +3bps.
- 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 4.16% pricing cuts not yet delivered the front end is the pressure point.
Status
Risk-on since 18 June 2026; consecutive print #20 in the journal, continuation of the 16 July 2026 read. Research only no positions, sizes, entries, stops, or P&L.