Monday, 3 August 2026

Market regime

Risk-on is the model's read, the second consecutive risk-on print since 30 July 2026, matching the prior published entry. Breadth rose to 63.8% (622/975) above the 50-day EMA, scored healthy, and the count moved up rather than down. Price extended: SPY closed 757.72, +8.0% over its 200-EMA of 701.86. Volatility eased further. VIX at 15.86 sits in the calm band, below the previous read, which was also calm. Rates went the other way at the long end: the 10Y at 4.75% rose 6bps week over week while the 2Y at 4.28% fell 5bps, steepening the 10Y–2Y spread to 0.47% (+11bps week over week). Breakevens added 2bps to 2.28% and the real 10Y rose 4bps to 2.47%, so most of the long-end move is real rate rather than inflation compensation. HY credit widened again to 2.84% (+5bps week over week, as of 30 July 2026). Claims at 197K (+9K week over week, as of 25 July 2026) remain low.

Key numbers

Regime assessment

The public ledger carries a second consecutive risk-on print, and the honest description of the mechanism is that two inputs improved while one did not. Volatility eased further within the calm band and the breadth count rose off its prior level; the credit tape did not confirm the read. Breadth is scored healthy, which means the participation question is, for now, answered in the read's favor rather than merely no longer getting worse.

What this configuration means for positioning is narrower than the label suggests. A calm VIX against an index 8.0% above its long trend describes a tape where the market is charging little for protection and price is already extended relative to its own mean. That is a state, not a direction: it says the cushion is real and the complacency is measurable, both at once.

Credit remains the standing dissent. HY has widened in consecutive weekly observations and did so again into a repeated risk-on print, which is the opposite of the sequence a durable risk-on read usually shows. Meanwhile the long end backed up 6bps on a rising real rate with breakevens near flat, so the curve steepened from the wrong end duration got more expensive rather than the front end simply getting cheaper. The risk-on label is defensible on the model's inputs. It is not corroborated by the two markets that price stress directly.

What would change the call

• Breadth at 63.8% (622/975) is scored healthy. A slip back below the prior 589 count would show the rise was a one-print bounce, not a turn.
• HY at 2.84% (+5bps week over week) is the clearest objection to the risk-on read. Continued widening argues credit is pricing something equity internals are not; a reversal to tightening would be the first corroboration the read has had.
• SPY at 757.72 is +8.0% above its 200-EMA of 701.86. Giving back that cushion with breadth losing its healthy score removes the price leg carrying the read.
• VIX at 15.86 sits in the calm band. A return to the elevated band would strip the volatility support and leave the read resting on the breadth count alone.
• The 10Y at 4.75% rose 6bps on a real rate up 4bps to 2.47%. Further long-end backup driven by the real component, with breakevens near 2.28%, applies duration pressure without an inflation story to explain it.
• The 10Y–2Y spread at 0.47% steepened 11bps. Renewed flattening, against HY still widening, would remove the one rates input reading constructively.
• Claims at 197K rose 9K week over week (as of 25 July 2026). A sustained climb across coming prints would give any breadth slip a macro cause rather than leaving it an internals reading.

What to watch

• Credit: whether HY holds near 2.84% or extends. It has widened in consecutive weekly observations, and remains the input most capable of falsifying the read.
• Breadth: whether the 622/975 count holds the model's healthy score or slips back toward the margin. This distinguishes a genuine participation turn from a short bounce.
• Volatility: whether VIX holds the calm band, or re-expands. The read leans on this input alongside breadth.
• Rates: whether the 10Y at 4.75% keeps backing up against a 2Y at 4.28%, and whether the 0.47% spread steepens further from the long end.
• Inflation: the next CPI against a breakeven at 2.28% and a real 10Y at 2.47%. Which of the two absorbs the print determines whether the long-end move is policy or price expectations.

Status

Risk-on as of 3 August 2026; second consecutive risk-on print, since 30 July 2026.