Monday, 27 July 2026

Market regime

Risk-on — the model held risk-on for a second consecutive print, since 24 July 2026. Internals carried it. Breadth widened to 62.6% (610/975) above the 50-day EMA, up into healthy territory from the healthy but unconfirmed 58.0% of the prior print. SPY closed 738.85, +5.8% over its 200-EMA of 698.57, a touch below the prior print's +5.9% stretch. What did not improve was rates: the 10Y sits at 4.69% (+14bps week over week) and the 2Y at 4.33% (+15bps week over week), leaving the 10Y–2Y spread at 0.36% (−1bp week over week), and the real 10Y at 2.43% (+12bps week over week) is still leading the repricing, with breakevens at 2.26% (+2bps). HY credit widened again, 6bps week over week to 2.79%. VIX at 18.67 reads elevated, not calm. Claims stayed firm at 187K (−22K week over week, as of 18 July 2026).

Key numbers

Regime assessment

This is a risk-on print with two of its four inputs still pointing the wrong way, which makes it a lower-quality risk-on than the label suggests. Breadth widening into the low-60s is the real change: participation broadened rather than the index being dragged by a narrowing cohort, and that is the input the model weights when deciding whether to extend trust to strength. Against it, vol reads elevated and credit is now two prints into widening the confirm that normally accompanies a durable risk-on stretch is absent. A real 10Y at 2.43% keeps the pressure on the longest-duration equity regardless of what the breadth gauge says, so the risk-on read is best taken as permission to treat broad strength as tradable, not as evidence the rates and credit problem resolved. The honest characterisation: the base is not built on all four legs, and the gap between the breadth signal and the credit signal is the thing to watch.

What would change the call

• Breadth at 62.6% (610/975) is what is carrying risk-on. A slide back under the mid-50s removes the main support for risk-on.
• HY credit at 2.79% (+6bps week over week) is widening, not confirming. Continued widening from here argues risk-on is premature; a turn back to tightening is the confirmation the print currently lacks.
• VIX at 18.67 is elevated. A push higher from an already-elevated base rather than a settle back toward the calm band would make this a risk-on call with no vol support at all.
• The real 10Y at 2.43% (+12bps week over week) and the 0.36% spread (−1bp week over week) leave the curve a few prints from inversion. Inversion plus a further real-yield climb is the fastest path back out of risk-on.
• SPY at 738.85 is +5.8% over its 200-EMA (698.57). Losing that stretch removes the price leg while credit is already offside.

What to watch

• Credit: HY has widened two consecutive weekly reads to 2.79%. The next prints decide whether this is drift or funding stress building under a market the model is reading risk-on.
• Rates: the 10Y at 4.69% and 2Y at 4.33% flattened the spread to 0.36%. Watch for inversion and for whether the 2.43% real 10Y keeps leading.
• Next CPI against a 2.26% breakeven (+2bps week over week): a hot print with the real 10Y already at 2.43% squeezes duration further, independent of breadth.
• Labor: claims at 187K (−22K week over week, as of 18 July 2026) remain firm. The test is whether 159.0M payrolls and 4.2% unemployment hold into the next release with the funds rate at 3.63%.
• Breadth: 62.6% (610/975) is a healthy pass. Whether it extends or fades is the single cleanest tell on this risk-on read.

Status

Risk-on as of 27 July 2026; second consecutive risk-on print, since 24 July 2026. Research only no positions, sizes, entries, stops, or P&L.