Monday, 10 August 2026

Market regime

Risk-on is the model's read, the same regime as the prior published entry of 7 August 2026. This is the sixth consecutive risk-on read in the journal (n=6). Breadth gave back ground: 67.3% of the universe (656/974) trades above its 50-day EMA, below the prior count but still scoring healthy. SPY closed 773.02, +9.6% over its 200-EMA of 705.42. VIX at 15.46 sits higher in the calm band than on the prior read. Rates fell harder than last week: the 10Y dropped 10bps week over week to 4.65% and the 2Y dropped 9bps to 4.19%, leaving the 10Y–2Y spread barely changed at 0.46% (−1bp). Breakevens fell 3bps to 2.25% and the real 10Y fell 7bps to 2.40%. HY tightened another 15bps to 2.70%. Claims stand at 199K (+1K week over week, as of 1 August 2026). All FRED prints carry an as-of date of 7 August 2026 except where noted.

Key numbers

Regime assessment

The divergence flagged on the prior read persisted. Breadth slipped while credit kept tightening, so the two inputs that pulled apart last week are still pointed in different directions. The model classifies risk-on and every input sits inside its favourable band. A read carried by credit while participation slips is narrower than one supported by both, which keeps the specific narrowing the prior level described. It does not change the classification: breadth still scores healthy, so the narrowing is a matter of degree rather than a broken input.

The rate move re-accelerated and this time it was parallel. A 10bp fall at the 10Y against a 9bp fall at the 2Y leaves the curve essentially where it was at 0.46%, so the decline says little about growth expectations either way. The composition repeated: the real 10Y fell 7bps while inflation compensation gave up 3bps, the second consecutive observation in which the real rate carried most of the move. Two observations of a decomposition are two observations. The easing-signature interpretation now has a repeat behind it and still no confirmation from any labor or activity print on this sheet.

Geometry eased slightly. An index 9.6% above its 200-EMA with VIX at 15.46 is marginally closer to trend and dearer on insurance than the prior read a slightly narrower cushion and a slightly fuller premium at the same time. Six prints remain a short series clustered in a single window, and the entire sequence has run without a volatility expansion or a credit widening to test it. Nothing here has been observed under stress.

What would change the call

• HY at 2.70% has now tightened four observations running, most recently 15bps. A widening print reverses the strongest single contributor to this sequence.
• Breadth at 67.3% (656/974) slipped from the prior count. A further decline would make participation the dissenting leg.
• SPY at 773.02 is +9.6% above its 200-EMA of 705.42. Further compression of that cushion alongside a falling breadth count removes the price leg.
• VIX at 15.46 sits in the calm band and rose from the prior read. Expansion out of the band strips the volatility input common to all six prints.
• The 10Y at 4.65% and 2Y at 4.19% fell nearly in parallel; the spread held 0.46%. A resumption of 10Y-led decline that flattens the spread below 0.46% recasts the move as a growth signal rather than a policy one.
• The real 10Y at 2.40% fell 7bps against a 3bp fall in the 2.25% breakeven. If that split inverts and breakevens lead the decline, the demand-weakness reading displaces the easing reading.
• Claims at 199K (as of 1 August 2026) rose 1K. A sustained climb supplies a labor cause that none of the current inputs would anticipate.

What to watch

• Credit: whether HY holds 2.70% or gives back part of a four-print tightening run. Consecutive 14–15bp weekly moves are the size that mean-reverts.
• Breadth: whether the 656/974 count steadies or the slip from the prior read proves to be a turn from a topping count.
• Rates: whether the re-acceleration to −10bps continues, and whether the real-rate-led composition holds for a third observation.
• Labor: the next claims print against 199K, and the next UNRATE and PAYEMS updates, both currently stale at 1 July 2026.
• Volatility: whether VIX at 15.46 stays inside the calm band. The sequence has never been tested by an expansion, so the first one is the first real information.

Status

Risk-on as of 10 August 2026; sixth consecutive read in the journal (n=6), same regime as 7 August 2026.