Wednesday, 12 August 2026

Market regime

Risk-on is the model's read, the same regime as the prior published entry of 11 August 2026. This is consecutive risk-on read #8 in the journal, a run that began 30 July 2026. Breadth edged up: 66.7% of the universe (650/975) trades above its 50-day EMA, a higher count than the prior read and still scoring healthy. SPY closed 772.54, +9.3% over its 200-EMA of 706.69. VIX at 14.55 sits in the calm band, lower than the prior read. Rates mostly stalled: the 10Y added 1bp week over week to 4.70% while the 2Y fell 3bps to 4.22%, widening the 10Y–2Y spread 4bps to 0.48%. Breakevens rose 1bp to 2.27%; the real 10Y was flat at 2.43%. HY widened 1bp to 2.72%. Claims stand at 199K (+1K week over week, as of 1 August 2026). FRED market prints carry an as-of date of 11 August 2026 except where noted.

Key numbers

Regime assessment

The model classifies risk-on and every input remains inside its favourable band. The leg that carried the classification through the breadth wobble has stopped helping. Credit tightened on each observation of the prior run; this print widened 1bp. One basis point is noise, but it ends the streak, and the sequence no longer has an input improving on every observation. What remains is a classification held up by levels rather than by direction.

Breadth turned higher this print, 650 of 975 after 648 of 975. A two-name gain is not a direction; one point establishes nothing on its own. Participation is holding rather than dissenting, and there is no labor or activity data on this sheet dated later than 1 August 2026 to argue with it.

Rate movement was near-nil at the back end and the decomposition went quiet with it: 1bp on the 10Y, 1bp on breakevens, nothing on the real rate. Last week's inflation-repricing reading has no fresh evidence either way. The steepening to 0.48% came almost entirely from the 2Y falling 3bps a front-end move, which is where policy expectation shows up first, though a single 3bp print carries no policy conclusion on its own. Geometry widened to +9.3% above the 200-EMA from +9.1%, and VIX eased to 14.55. A larger cushion on cheaper insurance means both moved with the position of strength at once. Eight prints in one window, none of them taken during a volatility expansion or a genuine credit widening, remains a short series.

What would change the call

• HY at 2.72% widened 1bp, ending the tightening run. A second widening print, particularly one of 10bps or more, removes the input that carried the earlier prints.
• Breadth at 66.7% (650/975) is a higher count than the prior read. Consecutive lower counts from here would establish participation as a downtrend rather than a wobble.
• SPY at 772.54 is +9.3% above its 200-EMA of 706.69, up from +9.1%. Compression alongside falling breadth would remove the price leg.
• VIX at 14.55 fell off the prior read. A move out of the calm band strips the one input common to all eight prints.
• The 2Y at 4.22% fell 3bps while the 10Y at 4.70% was flat, steepening the spread to 0.48%. A continued front-end-led steepening would need a labor or activity print to distinguish policy-path repricing from growth deterioration; none is available dated after 1 August 2026.
• The 2.27% breakeven and the 2.43% real 10Y both went quiet. A resumption of breakeven-led moves revives the inflation-repricing reading; a real-rate-led move revives the policy one. Flat prints resolve neither.
• Claims at 199K (as of 1 August 2026) rose 1K. A sustained climb supplies a labor cause the current inputs do not anticipate.

What to watch

• Credit: whether the 2.72% HY print is a single-basis-point pause or the turn, and how the next observation resolves it.
• Breadth: whether the 650/975 count extends its gain or turns lower.
• Rates: whether the 2Y keeps leading the curve steeper from 0.48%, and whether the back end stays near 4.70%.
• Volatility: whether VIX at 14.55 holds inside the calm band after easing from the prior read.
• Labor: the next ICSA release against the 199K reading of 1 August 2026, the only high-frequency activity input on this sheet.

Status

Risk-on since 30 July 2026; consecutive print #8, same regime as 11 August 2026.