Market regime — VIX, the curve, credit spreads
reading the weather before picking a stock · The market around the stock — regime gauges
In plain English
A great stock in a stressed market still goes down. The Market page reads the broad gauges a professional desk checks first: how much fear option prices carry (VIX, and whether near-term fear sits above three-month fear), what the bond market says about growth (the slope of the yield curve), what credit charges for default risk (high-yield and investment-grade spreads), how the index sits against its own high and trend and how many stocks are joining it (breadth), and the cross-asset tape — the dollar, oil, gold. Each gauge is read against a fixed band, in words: calm, ordinary, elevated, stress. The regime on top just counts those bands.
The gauges, translated
- VIX — the implied 30-day volatility of the S&P 500, backed out of option prices. Under 15 is a quiet tape; over 25 hedging is expensive; over 35 is panic.
- VIX term structure — VIX divided by VIX3M. Below 1 is contango, the usual shape; at or above 1 the market pays more for protection this month than for three months out — backwardation, the shape of a selloff.
- Vol premium — VIX minus the index’s realized 20-day volatility. Implied normally runs a few points above realized; a wide gap is fear being paid for, a negative one is a market moving more than it is hedged for.
- 10y − 2y spread — the slope of the Treasury curve. An inversion (below zero) has preceded every US recession since the 1970s; the re-steepening out of one is usually the dangerous stretch.
- High-yield spread — the extra yield junk bonds pay over Treasuries, as an option-adjusted spread (OAS). Under 3.5% credit sees little risk; over 5%, or widening 0.75 points in a month, credit is pricing defaults.
- Drawdown — how far the S&P 500 sits below its highest close of the past year: 5% is a pullback, 10% a correction, 20% a bear market.
- Breadth — the share of the app’s 1,000 screened names above their own 200-day average. A rally most stocks are not in is a narrow one.
- Financial conditions (NFCI) — the Chicago Fed’s weekly index of 105 measures of risk, credit and leverage; zero is average, positive is tighter.
- Real yield, breakeven, dollar, oil, gold, copper ÷ gold — context: what a riskless dollar earns after inflation, the inflation bonds price, and the cross-asset tape that moves with growth and fear.
What it tells you
Which way the wind blows. In a Calm regime a stock’s own setup carries the day; in a Stressed one, entries fail for reasons that have nothing to do with the company, correlations go to one and the hedges in the Options tab are expensive. The regime is not a forecast — it is a count of how many gauges already sit in a stress band — but it is the context every card on this site should be read in.
The calculation
percentile = share of the past year’s readings at or below today’s
VIX term = VIX ÷ VIX3M (≥ 1.0 → backwardation)
vol premium = VIX − realized σ₂₀ (σ₂₀ = stdev of 20 daily log returns × √252)
drawdown = last ÷ max(close over 252 sessions) − 1
regime score = Σ (stress = 2, elevated = 1) over 11 risk gauges
score < 2 → Calm · 2–4 → Cautious · ≥ 5 → Stressed
What each piece means
- VIX3M
- — the same implied volatility measured over three months instead of one
- OAS
- — option-adjusted spread — a bond’s extra yield over Treasuries, with embedded options stripped out
- σ₂₀
- — realized volatility: how much the index actually moved over the last 20 sessions, annualized
- NFCI
- — the Chicago Fed National Financial Conditions Index
- Σ
- — “sum of” — add the gauge scores together
A worked example
VIX at 28 (elevated, 1), its term structure at 1.02 (backwardation — stress, 2), high-yield spreads at 4.1% but up 0.9 points in a month (widening fast — stress, 2), the S&P 500 8% off its high (pullback, 0) and breadth at 38% (narrow — elevated, 1). Score 6 → Stressed. The same stock entries that worked in June are now fighting the tape.
Bands are judgment calls written down, not laws: VIX at 24.9 and 25.1 are the same market. Percentiles rank today against only the past year, so a calm year makes an ordinary reading look extreme. FRED series lag a business day, and nothing here predicts — a Stressed regime describes where the gauges are, not where they are going. Read the regime as context for the stock cards, never as a trade.
Dig deeper
See it run on live stocks →Weekly Monitor computes this on ~1,000 names — free, in your browser, every formula shown. Nothing here is advice.