Markov · market regime engine
Regime transitions, tape internals & expected-move rails — as of 2026-09-01
Current regime
Risk-On
Day 21 of this run · median Risk-On run: 23 days
(longest 114)
VIX 16.0 · Normal
Dow Theory: Diverging
Sector strength 54
Markov odds (from 2671 days since 2016-01-04)
97%
stays Risk-On tomorrow
15%
flips within 5 sessions
last 90 sessions · ■ Risk-On ■ Neutral ■ Risk-Off
The regime, painted on SPY — last 12 months · ■ Risk-On ■ Neutral ■ Risk-Off
2025-09-02
SPY 762 · Risk-On
Regime transition matrix
| from \ to | Risk-On | Neutral | Risk-Off | obs |
| Risk-On ← | 97% | 2% | 2% | 1730 |
| Neutral | 19% | 68% | 13% | 154 |
| Risk-Off | 3% | 3% | 94% | 786 |
Observed transition frequencies over 2,671 trading days since 2016-01-04 (2,542 pre-launch days reconstructed by replaying the identical live rule on historical data). Frequencies, not forecasts.
The receipts — 2016–2026 replay
5/5 major drawdowns flagged before −10%
48 Risk-Off flags · 79% false alarms
it's a smoke detector — every fire caught, most alarms weren't fires
| Market peak | Risk-Off flagged | SPY loss at flag | Days before −10% | Final depth |
| 2018-01-26 | 2018-02-05 | -7.9% | 3 | -10.1% |
| 2018-09-21 | 2018-10-10 | -4.8% | 65 | -19.3% |
| 2020-02-19 | 2020-02-24 | -4.7% | 3 | -33.7% |
| 2022-01-04 | 2022-01-18 | -4.4% | 35 | -24.5% |
| 2025-02-19 | 2025-02-27 | -4.5% | 14 | -18.8% |
Risk-On: 11.3% ann. vol · worst day -4.2%
Neutral: 14.0% ann. vol · worst day -3.2%
Risk-Off: 27.5% ann. vol · worst day -10.9%
What following it would have looked like
| Approach | CAGR | Volatility | Sharpe | Worst drawdown | Time in market |
| Buy & hold SPY | 15.2% | 17.8% | 0.89 | -33.7% | 100.0% |
| Step aside in Risk-Off, re-enter when it clears | 9.9% | 9.7% | 1.03 | -14.4% | 71.0% |
| Step aside in Risk-Off, re-enter on breadth recovery | 13.0% | 10.7% | 1.2 | -14.4% | 77.0% |
Hypothetical replay at next-day close; no costs, taxes, or slippage. Re-entry uses a proprietary breadth-based recovery confirmation. Past performance does not predict future results.
How we score it: an episode is an SPY drawdown crossing −10% from a high; a catch means the state flipped Risk-Off before that cross; a false alarm is a Risk-Off flag not followed by a further −5% within 20 sessions. Replay uses only data available on each day — no fitted parameters, no hindsight. The signal's inputs are proprietary. This measures risk conditions, not future returns.
Tape internals
S&P 500 advance/decline line (blue) vs SPY price (grey) · since 2026-01-02
Today: -201 (+150 / −351)
McClellan: -22
RSP / SPY — equal weight vs cap weight
YTD: +1.2%
52-wk: 30 highs · 44 lows of 2421
Up/Down vol: 0.8x
Above 20-day: 32.0% (-19.3 / 5d)
Expected-move rails — realized-vol based (HV → weekly ±1σ/±2σ), not options-implied
SPY
±1.47% / wk
746.7758.03769.35780.67792.0
QQQ
±2.59% / wk
679.35697.89716.43734.97753.51
DIA
±1.54% / wk
518.58526.81535.04543.27551.5
IWM
±2.06% / wk
283.58289.67295.76301.85307.94
Median stock expected move: ±4.0%/wk
78 of 502 S&P names (15.5%) already outside their weekly ±1σ band
Volatility term structure — as of 2026-09-01
14.3
9D
16.3
30D
18.3
3M
20.6
6M
Contango — calm
VVIX 91.3
MOVE 77.9 bond vol
An upward-sloping curve (near-term vol below longer-dated) is the market's normal resting state; inversion has accompanied every major stress episode of the past decade. Context only — not part of the regime signal.
The whale's collar — JPMorgan Hedged Equity Fund (JHEQX), ~$20.3B · estimated strikes, verified quarterly against SEC filings
SPX 7,633
call cap 7,910 (+3.6%)
put floor 7,125 (-6.7%)
tail 6,000
rolls in 29 days (2026-09-30)
6,000 tail
7,125 floor
7,910 cap
A ~$20B quarterly put-spread collar on the S&P 500; dealer hedging around its strikes can act as support/resistance, especially near the quarterly roll.
Strikes estimated from the fund's documented methodology; last SEC-verified collar (2026-03-31 → 2026-06-30): 6,865 / 6,180 / 5,210.
Breadth — indices, sectors & thematics
S&P 500 breadth (green, fixed 0–100 · dashed = 50%) vs SPY price (grey) · since 2026-02-12 · today 52.7%
| Index | Bullish (TSI≥0) | RSI-bullish | > 50-day | > 200-day | Avg TSI | Status |
| SPY S&P 500 |
53%
|
54% | 47% | 61% | +3.1 | Neutral |
| QQQ Nasdaq 100 |
53%
|
52% | 46% | 61% | +3.4 | Neutral |
| DIA Dow Jones |
53%
|
53% | 47% | 67% | +4.8 | Neutral |
| IWM Russell 2000 |
51%
|
51% | 41% | 58% | +1.0 | Neutral |
| IYT Transports |
23%
|
23% | 16% | 49% | -9.2 | Bearish |
| XLE Energy |
90%
|
90% | 90% | 86% | +18.5 | Bullish |
| XOP Oil & Gas E&P |
80%
|
80% | 84% | 75% | +14.9 | Bullish |
| XLV Healthcare |
80%
|
78% | 76% | 80% | +16.7 | Bullish |
| XBI Biotech |
72%
|
72% | 58% | 69% | +8.9 | Bullish |
| XLB Materials |
68%
|
68% | 56% | 68% | +5.6 | Bullish |
| XLF Financials |
62%
|
63% | 58% | 82% | +6.4 | Lean Bullish |
| XLP Consumer Staples |
59%
|
59% | 50% | 59% | +2.1 | Lean Bullish |
| XLC Communication |
58%
|
58% | 58% | 46% | +9.5 | Lean Bullish |
| XLK Technology |
52%
|
53% | 49% | 70% | +4.9 | Neutral |
| XLY Consumer Disc. |
43%
|
49% | 36% | 36% | -2.0 | Lean Bearish |
| XLI Industrials |
36%
|
36% | 22% | 52% | -3.7 | Lean Bearish |
| XLRE Real Estate |
33%
|
37% | 23% | 53% | -4.5 | Bearish |
| JETS Airlines |
28%
|
30% | 19% | 38% | -9.4 | Bearish |
| SMH Semiconductors |
24%
|
24% | 12% | 68% | -9.0 | Bearish |
| XLU Utilities |
10%
|
16% | 10% | 23% | -17.9 | Bearish |
52-week extremes by sector — % of holdings within 3% of high / 10% of low
XLE21 names
near high 29%
near low 0%
XOP51 names
near high 29%
near low 2%
XLV59 names
near high 19%
near low 3%
XBI147 names
near high 6%
near low 1%
XLC24 names
near high 4%
near low 17%
XLK73 names
near high 3%
near low 3%
JETS47 names
near high 2%
near low 28%
XLI83 names
near high 2%
near low 19%
IYT43 names
near high 2%
near low 7%
XLF76 names
near high 0%
near low 8%
XLRE30 names
near high 0%
near low 20%
XLB25 names
near high 0%
near low 12%
XLP34 names
near high 0%
near low 24%
SMH25 names
near high 0%
near low 0%
XLU31 names
near high 0%
near low 61%
XLY47 names
near high 0%
near low 30%
Regime states are classified daily from proprietary trend and volatility conditions across the major U.S. indices; transition probabilities are observed frequencies, not forecasts.
A/D line and McClellan computed from S&P 500 constituents' daily prices. Expected moves are historical-volatility projections, not options-implied.
Not investment advice.
The Fed follows the 2-year
Every Fed cutting cycle since 2000 was preceded by the 2-year yield crossing below the funds rate
(leads of 4–20 months) · monthly, FRED
2Y Treasury 4.22%
Fed funds 3.63%
spread +0.59 · 2Y above since 2026-03
2000 cuts · called 6mo early
2007 cuts · called 13mo early
2019 cuts · called 4mo early
2024 cuts · called 20mo early
labor flag: quiet
· Sahm -0.03 · payrolls +0.2% 6m
2000 · 2005 · 2010 · 2015 · 2020 · 2025
0.1–6.8% · as of 2026-07