Friday, 7 August 2026

Market regime

Risk-on is the model's read, the same regime as the prior published entry of 6 August 2026. This is the fifth consecutive risk-on read in the journal (n=5), since 30 July 2026. Breadth extended its gain: 69.4% of the universe (676/974) sits above its 50-day EMA, scoring healthy and roughly four points above the prior count. SPY closed 773.16, +9.7% over its 200-EMA of 705.02, a slightly wider cushion as price outran the trend line. VIX at 14.90 sits lower in the calm band. Rates continued lower with less force: the 10Y fell 6bps week over week to 4.69% and the 2Y fell 3bps to 4.25%, flattening the 10Y–2Y spread 3bps to 0.44%. Breakevens fell 2bps to 2.26% and the real 10Y fell 4bps to 2.43%, so most of the decline came out of the real rate this week. HY tightened 14bps to 2.71%, the largest single-week move in the credit column of this sequence. Claims at 199K (+1K week over week, as of 1 August 2026) stay low.

Key numbers

Regime assessment

The inputs still move as a bloc. Credit made the strongest contribution of the sequence while breadth also improved, and that agreement is the substance of this print. The model still classifies risk-on, and both inputs remain inside their favourable bands. A read leaning on both credit and participation is no narrower than the prior one, and the label is identical.

The rates decline lost most of its force. A 6bp fall in the 10Y against a 12bp fall the week before is deceleration, and the composition shifted this week the real rate carried it, with inflation compensation nearly flat at 2.26%. That is closer to a policy-easing signature than to demand weakness, but a single weekly observation of a decomposition does not establish which it is, and the curve at 0.44% is doing no work either way.

Geometry stayed put. An index 9.7% above its long trend with VIX under 15 continues to describe a market pricing insurance cheaply while extended above its own mean; the cushion widened marginally because price rose faster than the 200-EMA. Five prints is a longer series than four and still a short one all five fall since 30 July 2026, so this is repeated observation of a single window, not confirmation across regimes.

What would change the call

• HY at 2.71% has tightened in three consecutive observations, most recently by 14bps. A widening print would remove the input currently carrying the most weight in the read.
• Breadth rose to 69.4% (676/974) from the prior count. A reversal toward a marginal score would make the breadth leg the dissenting input rather than a supporting one.
• SPY at 773.16 is +9.7% above its 200-EMA of 705.02, up from the prior cushion. Compression alongside falling breadth would remove the price leg.
• VIX at 14.90 sits in the calm band. Re-expansion out of the band would strip the volatility input common to all five risk-on prints.
• The 10Y fell 6bps to 4.69% while the 2Y fell 3bps to 4.25%. A re-acceleration of the 10Y-led decline with the spread flattening below 0.44% would recast the move as a growth signal.
• The 10Y breakeven at 2.26% barely moved (−2bps) while the real 10Y fell 4bps to 2.43%. A reversal of that split breakevens falling faster than the real rate would argue demand weakness instead of easier policy.
• Claims at 199K (as of 1 August 2026) rose 1K. A sustained climb would supply a labor-market cause for any breadth deterioration.

What to watch

• Breadth: whether the 676/974 count holds or extends. It is the participation leg behind the internal agreement noted on 6 August 2026.
• Credit: whether HY holds 2.71% or wider. Three tightening prints is still a short series, and a 14bp weekly move is the kind that mean-reverts.
• Rates: whether the deceleration to −6bps continues, and whether the real-rate-led composition repeats or flips back toward breakevens.
• Labor: the next claims print against 199K, which is the only input on the sheet that could attach a cause to any breadth slip.

Status

Risk-on as of 7 August 2026; fifth consecutive read in the journal (n=5) since 30 July 2026, same regime as 6 August 2026.