[ Macro Regime ]
Risk On
Institutional capital is flowing into equities and credit.
[ What It Means ]
Risk On is the algo's standard bullish signal. It indicates that the balance of intermarket evidence — equity momentum, credit confidence, volatility, and commodity flows — favors risk-seeking behavior. Most of your best trending days occur in this regime.
The macro backdrop supports directional long exposure. SPY is trending above key moving averages. Credit spreads are tightening (HYG outperforming TLT). Volatility is contained. This is the "normal bullish" state where momentum strategies have historically outperformed.
[ Trading Implications ]
- Trend-following and momentum setups are favored over mean reversion.
- Pullback entries on strong names tend to resolve higher rather than breaking down.
- Volatility selling strategies (short premium) have a statistical edge in this regime.
- Defensive sectors (utilities, staples) tend to underperform — avoid hiding in safety.
- Keep a trailing stop rather than a fixed target — trends extend further than you expect.
[ Historical Context ]
Risk On is the most common bullish regime, appearing in roughly 30-40% of trading sessions. It represents the "default state" of a healthy market tape. Transitions from Neutral to Risk On often signal the start of multi-week trending periods.
[ Key Indicators ]
- SPY above 20-day SMA with positive RSI momentum
- HYG/TLT ratio stable or rising
- VIX below 20 or declining toward its moving average
- Gold (GLD) flat or declining — no flight-to-safety demand
- K-NN analogs show moderate positive forward expectancy
[ Frequently Asked Questions ]
What does Risk On mean for day traders?
Risk On means the algo's intermarket model sees bullish conditions: equity momentum is positive, credit spreads are tight, volatility is contained, and historical K-NN analogs suggest positive forward returns. Trend-following and breakout entries are statistically favored.
How is Risk On different from Extreme Risk On?
Risk On is the standard bullish regime where most (but not all) macro pillars are aligned. Extreme Risk On requires unanimous alignment across all five pillars and typically has higher conviction scores. Risk On is more common; Extreme Risk On is rare.
What sectors perform best during Risk On?
High-beta sectors like technology (QQQ), consumer discretionary, and small caps (IWM) historically outperform during Risk On. Defensive sectors like utilities and consumer staples (XLP) tend to lag as capital rotates toward growth.
How do I get daily Risk On/Risk Off alerts?
Sign up for the free Macro Bias daily email. You'll receive the algo's regime score every trading day before the bell. Premium subscribers get the full briefing with sector scoring, K-NN diagnostics, and system risk protocol.
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