Friday, 23 October 2026

Market regime

Government bond yields fell sharply over the week while the extra yield investors demand to hold junk bonds rose, and together these suggest money is moving toward safety. Federal Reserve data show the 10-year Treasury yield down 13 basis points week over week to 4.96% as of 22 October 2026, while the high-yield credit spread widened 9 basis points. That move is context and does not shift the call.

The inputs that do decide the call remain inside neutral. The SPDR S&P 500 ETF (SPY), a fund that tracks the S&P 500, closed 3.8% above its 200-day exponential moving average (EMA), its long-term trend line. That is short of the 5% mark in the fixed rules, so breadth must clear 60% for risk-on. With 519 of 978 names above their own 50-day EMA, breadth is about seven points below that bar. The Cboe Volatility Index (VIX), a gauge of expected stock swings, was 19.03 at the 22 October 2026 close. That is elevated, but well under the 28 trigger. The 23 October 2026 VIX close is not yet published.

Key numbers

Regime assessment

The stock market's long-term uptrend is intact, but too few stocks are joining in to call it a broad advance. A narrow majority above their short-term trend suggests buying is spread unevenly. With SPY inside the 5% mark, only wider participation can move the read toward risk-on.

The bond market is showing more caution than the stock market. Most of the 10-year yield decline came from the real rate, which fell 10 basis points, while inflation expectations fell only 3. This suggests investors are pricing slower growth or seeking safety, not a sharp drop in inflation. The 10-year fell more than the 2-year, so the curve flattened. Junk-bond spreads moved the other way and widened.

Labor data do not echo that caution. Initial jobless claims of 194K for the week to 17 October 2026 remain low.

Rates, credit, labor and housing readings are context only and do not bear on the call.

What would change the call

Neutral: no risk-off trigger is met, and risk-on needs breadth above 60% (now 53.1%). The call turns risk-off if any of these happens:

• SPY closes more than 2% below its 200-day EMA (now +3.8%).
• Breadth falls under 40% (now 53.1%).
• VIX rises above 28 (now 19.03).

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

Each supporting view has its own test:

• Uneven participation: fails if breadth closes above 60%. That would show the advance has broadened.
• Intact uptrend: fails if SPY closes below its 200-day EMA.
• Bond-market caution: fails if, week over week, the 10-year yield rises and the high-yield spread narrows. That would show investors taking risk back on in bonds.

What to watch

• VIX close for 23 October: once published, it will show whether volatility kept rising from the elevated 22 October 2026 level or eased. A close above 28 turns the read risk-off.
• Daily breadth reading: each close tests the read. A reading above 60% turns it risk-on. A reading under 40% turns it risk-off.
• SPY versus its 200-day EMA: under the fixed rules, a close at least 5% above the line lets breadth of 55% to 60% count toward risk-on. A close more than 2% below it turns the read risk-off.
• Federal Reserve data updates: new yield and credit-spread readings will show whether this week's move toward safety continues. Claims add labor context. None of these move the call.

Status

Neutral; 11th consecutive neutral read in the journal, same as the prior level on 22 October 2026.