Tuesday, 13 October 2026

Market regime

Nothing at Tuesday's close moved far enough to test the call, and the closest input is still breadth. In the close-of-day breadth reading, 413 of 978 names closed above their own 50-day exponential moving average (EMA), a short-term trend line. That leaves breadth at 42.2%, just above the 40% line where the market would be classed as risk-off. A modest slide in the average stock would cross it.

The other two triggers are far away. The SPDR S&P 500 ETF (SPY) closed 6.8% above its 200-day EMA, a long-term trend line, while the risk-off line sits 2% below it. The VIX, the Cboe measure of expected stock volatility, was 15.21 at the 12 October 2026 close, well under its trigger of 28. The 13 October VIX close is not yet published.

Federal Reserve (FRED) data show only small weekly moves in rates and credit. The 10-year Treasury yield fell 4 basis points week over week as of 9 October. Most of that drop came from lower inflation expectations: the 10-year breakeven fell 3 basis points, and the real yield fell 1. Rates inform the reading but do not change the call.

Key numbers

Regime assessment

The index is in better shape than most of the stocks inside it. A majority of names trade below their short-term trend, while the index holds well above its long-term one. This suggests a narrow group of large companies is carrying the market.

The rate picture gives that group little fresh help. Because the 10-year yield's decline came mostly from lower inflation expectations, the real cost of long-term money barely changed. Lower real yields matter most to companies whose value rests on distant profits. That support did not grow this week.

Credit drifted slightly the other way. The high-yield spread, the extra yield investors demand to hold riskier corporate bonds, widened a little while Treasury yields fell. The move was small and came from a low level. Jobless claims near 197K show no labor strain behind it.

The 2-year yield sits well above the fed funds rate. This suggests bond investors do not expect the Federal Reserve to cut rates soon. The fed funds figure dates from 1 September, so a newer reading could narrow that gap.

What would change the call

Neutral holds because no risk-off trigger is met, and risk-on needs breadth at 55% or above while SPY stays at least 5% above its 200-day EMA, or above 60% otherwise (now 42.2%). The call turns risk-off if any of these happens:

• SPY closes more than 2% below its 200-day EMA (now +6.8%).
• Breadth falls under 40% (now 42.2%).
• VIX rises above 28 (now 15.21).

Rates, credit, labor and housing data do not move the call.

Each supporting view has its own test:

• Narrow leadership: fails if breadth climbs toward 55% while SPY holds at least 5% above its 200-day EMA.
• Little added support from real yields: fails if the real 10-year yield falls well below 2.91% while breakeven inflation holds near 2.33%.
• Credit widening is noise rather than stress: fails if the high-yield spread keeps widening from 3.11% and initial claims rise from 197K.
• No near-term cuts priced at the short end: fails if the 2-year yield falls toward the 3.75% fed funds rate.

What to watch

• Breadth against the 40% line: each close-of-day breadth reading decides whether the call moves. A close under 40% turns the read risk-off.
• VIX close for 13 October: once published, it updates the 12 October reading.
• Real 10-year yield and breakeven inflation: the next readings show whether the decline in inflation expectations continues.
• High-yield credit spread: the next reading shows whether the widening extends while Treasury yields fall.
• Weekly jobless claims: the next print updates the 3 October reading.
• Fed funds, payrolls and unemployment: the next monthly releases update the 1 September readings.
• Housing starts: the next release updates the 1 August reading.

Status

Neutral — third consecutive neutral read, matching the prior published entry of 12 October 2026.