How to Use This Report

How to read the report

A healthy report will usually show supportive structure, constructive tactical conditions, broad participation, and high visibility. A fragile report may still show an intact structure, but tactical conditions will soften, internal fracture may activate, and the narrative will call out weakening participation or coherence.

Read the regime and conditional risk panels first for the macro picture, then the conditions row for texture, and finally the narrative for a plain-language synthesis.

Raw Data

The eight source inputs that feed the model. No interpretation is applied at this stage — these are closing prices and yields pulled directly from market data.

• SPY — S&P 500 ETF. Primary equity benchmark; drives Temperature and Wind.
• VIX — CBOE implied volatility index. Primary input for Storm Risk.
• QQQ — Nasdaq-100 ETF. Large-cap growth; used in the breadth composite alongside SPY.
• IWM — Russell 2000 ETF. Small-cap proxy; divergence between IWM and SPY is a key breadth signal.
• HYG — High yield corporate bond ETF. Credit conditions; weakness often precedes equity stress.
• LQD — Investment grade corporate bond ETF. Used with HYG to gauge overall credit health.
• 2Y Yield — 2-year Treasury yield; reflects near-term Fed rate expectations.
• 10Y Yield — 10-year Treasury yield; used with 2Y to compute yield curve slope for Macro Crosswind.

Signal Flow

Raw inputs are transformed in two stages before reaching the report panels.

Stage 1 — Derived signals: SPY and VIX feed Temperature (risk appetite pressure), Wind (trend persistence), and Storm Risk (volatility pressure). QQQ, IWM, HYG, and LQD feed the Breadth composite. The 2Y and 10Y yields feed Macro Crosswind. Consistency is computed from the agreement among all signals.

Stage 2 — Qual labels: Temperature drives Risk Appetite (Frigid → Hot). Wind drives Trend (Doldrums → Gale). Consistency drives Visibility (Poor → High). The structural history of these signals determines Structure and Regime. The Signal Flow diagram in Financial Metrics shows this graphically.

Regime

The regime label describes the market's broader texture. It answers questions like whether trend persistence, mean reversion, or volatility pressure is dominating the tape.

Possible states: Trendy, Choppy, Calm, Squally, Stormy, Fragile, Tense.

Conditional Risk

The outlook panel is a bounded downside-risk estimate — specifically the probability of a SPY decline greater than 1.5% over the next five sessions. It is a risk gauge, not a forecast narrative.

Low values (<20%) suggest the environment is not particularly vulnerable to sharp downside. High values (>35%) warrant additional caution.

Risk Appetite

Risk appetite is derived from Temperature and then recalibrated by the broader signal mix. A mildly soft temperature reading by itself should not force a defensive interpretation, but weak internals can push the label more cautionary.

Possible states: Frigid, Cold, Mild, Warm, Hot.

Trend

Trend is derived from Wind and reflects how persistent or fragile the current move looks. Weak breadth and poor confirmation can downgrade the trend read even when the headline tape still appears intact.

Possible states: Doldrums, Light Air, Variable, Steady Breeze, Gale.

Visibility

Visibility is derived from Consistency and tells you how much the signals agree with one another. Low visibility means the tape is harder to trust; poor visibility means internal coherence is deteriorating.

Possible states: High, Mixed, Low, Poor.

Structure

Structure describes the intermediate-term market framework — whether the underlying trend environment is still holding together or has begun to break down. It moves more slowly than Regime and is not affected by single-session volatility spikes.

Possible states: Supportive, Intact, Stressed, Broken.

Derived Signals Overview

Derived signals are normalized composites computed from the raw data. They sit between raw inputs and the qual labels shown on the home page. Each runs on a defined scale and feeds one or more downstream outputs.

• Temperature [−1 to +1] — Risk-on / risk-off pressure. Feeds Risk Appetite.
• Wind [−1 to +1] — Trend persistence vs. reversal pressure. Feeds Trend.
• Storm Risk [0 to +1] — VIX-driven volatility pressure. Amplifies downside risk signals.
• Breadth [−1 to +1] — Participation across size, credit, and equity segments. Feeds internal fracture detection.
• Macro Crosswind [−1 to +1] — Rates and yield-curve pressure on risk assets.
• Consistency [0 to 100%] — Internal coherence of all signals. Feeds Visibility.

Consistency

Consistency measures whether the inputs are reinforcing one another or fighting each other. It is one of the key ingredients used to detect internal fracture. High consistency supports high-conviction reads; low consistency warrants humility.

Storm Risk

Storm risk measures volatility pressure derived primarily from VIX. Elevated storm risk matters more when breadth is weak, because that combination tends to increase vulnerability to fast downside air pockets.

Breadth

Breadth measures participation — how widely the market move is supported across size (IWM vs SPY), credit (HYG, LQD), and equity segments. Weak breadth means fewer parts of the market are carrying the move, which can make an intact trend look healthier than it really is.

Macro Crosswind

Macro crosswind summarizes rates and yield-curve pressure using the 2-year and 10-year Treasury yields. A flat or neutral macro backdrop does not automatically cancel out weak internals, but a strong headwind can amplify them.

Narrative

The narrative is state-aware. It separates:

• Tactical outlook — the next 1 to 5 sessions
• Structural outlook — the broader intermediate-term climate
• Daily narrative — the most important interaction among current signals

Internal Fracture

Internal fracture is an overlay that activates when the headline regime still looks intact but breadth, wind, consistency, and storm risk weaken together. When active, the report becomes more cautionary and explicitly warns that participation is deteriorating beneath the surface.

Context

The compare view shows directional change only (↑/↓/~) versus the previous session and the 5-day norm. No magnitude is shown to avoid false precision — the purpose is to quickly surface whether conditions are improving, stable, or deteriorating.