dennisthiessenandClaude Opus 5
019ca1342a
The LLM-sourced capex/earnings observations carried 12+8 of 100 Warning points, so both pegged at 100 produced a Warning of 20.0 -- below the event study's 25.3 alarm threshold and still inside the "stable" band. The reading was arithmetically incapable of changing anything on screen, which is why refreshing it appeared to do nothing. They are now a qualitative overlay reported beside the scores rather than diluted into them. Calibrated against the 408 v2 sessions to 2026-07-24, reproduced offline from Alpaca + FRED; the harness matched the stored prod distribution exactly before any parameter was changed. State: - P3 used dd_pct * 5, reaching 100 at a 20% drawdown -- the 90th percentile of the observed distribution -- so 39/408 sessions sat at exactly 100 with no resolution left during the part of a selloff that matters most. Replaced with anchored breakpoints keeping headroom past the observed 36% maximum, blended 2:1 like P1/P2 instead of max(). P3's realized share of State falls from 65% to 40%, matching its nominal weight. - Credit level is now anchors-only. ICE capped FRED's BAMLH0A0HYM2 at a rolling 3-year window in April 2026, silently turning the 10-year percentile leg into a 3-year one that scored 20 points of stress at an OAS of 3.5 -- the level its own anchors call "mild". The anchors already encode the long-run distribution. Warning: - Added HY OAS 20-session widening (25%). The level is pinned at zero below the 3.5 anchor; its rate of change is not. - Divergence tapers to a 0.35 floor instead of a hard price_ret >= 0 gate, which zeroed the sensor through every decline: on 2026-07-24 the basket shed 10 points of participation in 20 sessions and Warning printed exactly 0. - The event study and the live monitor now share one sensor definition, so they cannot silently drift apart. Bands are per axis (State 20/50/80, Warning 20/40/60) with quadrant dividers at 50/40; v2 Warning never exceeded 64.9 against a shared 60, leaving that half of the quadrant unreachable. Realized shares: State 73/15/8/3%, Warning 69/20/8/3%. Snapshots now record credit_history_days and vix_history_days -- the percentile defect went unnoticed for months because nothing asserted the window the code claimed. Cutover: the first run rebuilds 400 sessions automatically; the Event Study job must be re-run, as its cached report self-invalidates on the methodology check. Co-Authored-By: Claude Opus 5 <noreply@anthropic.com>
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Regime Monitor v3 methodology
The Regime Monitor is an observational AI/Tech risk thermometer. It does not gate entries, exits, position size, ranking, or alerts about individual setups.
v3 supersedes v2. Every parameter below was calibrated against the 408 v2 sessions ending 2026-07-24, reproduced offline from the same Alpaca and FRED inputs the live job uses; the reproduction matched the stored prod distribution exactly (State avg 22.6/22.7, p80 35.1, max 91.2, P3 pegged 39, W1 live 108).
What changed and why
Fundamentals left the score. F1 (capex) and F3 (good-news-stock-down)
carried 12 + 8 of 100 Warning points. Pegged at maximum stress they produced a
Warning of exactly 20.0 — below the event study's 25.3 alarm threshold, and
still inside the "stable" band. The sourced observation could not change any
published conclusion, so refreshing it looked like it did nothing. They are now
a qualitative overlay reported beside the scores. Capex also stopped scoring
raising and holding identically at 0: holding is the deceleration case and
now scores 50, so a boom no longer reads the same as a stall.
The drawdown sensor stopped saturating. v2 used dd_pct * 5, reaching 100 at
a 20% drawdown — the 90th percentile of the observed distribution. 39 of 408
sessions sat at exactly 100 with no resolution left, and the price pillar showed
the top band on 13.5% of sessions. v3 uses named anchors with headroom past the
observed 36% maximum, and blends leader/confirm 2:1 as P1 and P2 already did
instead of taking max(). P3's realized share of State falls from 65% to 40%,
matching its nominal weight.
Warning gained a sensor with range. The HY OAS level is pinned at zero below the 3.5 mild anchor (2.77 at the cutover), so credit contributed nothing in a calm tape. Its 20-session rate of change still does, and spread widening is a classic lead.
The credit percentile leg was removed. Its reference window silently shrank from 10 years to 3 when ICE restricted the upstream series in April 2026, after which it scored 20 points of stress at a spread the same sensor's anchors call "mild". See Calibration below.
Breadth loss counts during declines. v2's divergence gate was
price_ret >= 0, so the sensor zeroed during every selloff. On 2026-07-24 the
basket shed 10 points of participation in 20 sessions while SMH fell 11.9% and
Warning printed exactly 0. v3 tapers to a floor instead: deterioration counts
fully when price masks it (true divergence, the dangerous pre-top case) and at
35% when price confirms it. Breadth level lives in State, but breadth
velocity appears nowhere else, so this is not double counting.
Bands are per axis. v2 Warning never exceeded 64.9 in 408 sessions while State reached 91.2, yet both used 30/60/80 with quadrant dividers at 60. The upper half of the Warning axis was unreachable.
Outputs
State — current structural stress:
- Price structure, 40%:
max(P1, P2, P3), one capped vote for correlated reads. - Fixed-basket breadth level, 25%.
- HY option-adjusted credit spread level, 20%.
- VIX level, 15%.
Warning — deterioration and divergence:
- Fixed-basket breadth divergence, 45%.
- 60-session SMH/SPY relative-strength deterioration, 30%.
- HY OAS 20-session widening, 25%.
Combined, RSP/SPY (former F4), and the NVDA canary (former P6) do not enter v3.
Calibration
P3 drawdown anchors, as (drawdown %, score): 0→0, 4→10, 8→25, 16→50, 28→78, 40→100, flat outside. Credit impulse is relative (+35% over 20 sessions = 100) rather than absolute, because +0.5pp means something very different at an OAS of 2.7 than at 8.0.
Bands are round, meaning-anchored numbers, not percentile fits — percentile thresholds would drift on every rebuild and silently rewrite what past snapshots meant. Realized shares over the calibration window:
| Axis | stable | watch | elevated | breaking | thresholds |
|---|---|---|---|---|---|
| State | 73.3% | 15.0% | 8.3% | 3.4% | 20 / 50 / 80 |
| Warning | 69.4% | 19.6% | 7.6% | 3.4% | 20 / 40 / 60 |
Quadrant dividers sit at each axis's watch/elevated boundary: State 50, Warning 40.
Scores renormalize over available fixed weights, but a band is published only at 75% or greater coverage. Trend deltas are suppressed when the participating pillar set changes. Zero means ordinary/healthy; only stress contributes.
Credit level is the named HY OAS anchors alone: 3.5 mild, 5.0 elevated, 7.0 stressed, linear between, and nothing else. v2 blended those anchors at 70% with a 30% upper-tail percentile over a nominally 10-year window.
That leg was removed rather than repaired. ICE restricted FRED to a rolling
3-year window for BAMLH0A0HYM2 in April 2026 — the series metadata states it
outright ("Starting in April 2026, this series will only include 3 years of
observations"), and an unbounded request returns the same 795 observations as a
30-year one. The v2 percentile therefore ranked the current spread against three
uniformly tight years (range 2.59–4.61 over the calibration window), which made
it fire early and saturate absurdly: at an OAS of 3.50 — the level the anchors
call mild, scoring zero stress — the blended sensor read 20.1, and the
percentile leg pegged at 100 by an OAS of 4.5. Across the 408 sessions it
roughly tripled the credit sensor's average (2.70 vs 1.00) and more than doubled
its nonzero days (60 vs 27).
The anchors already encode the long-run distribution as constants, so the percentile was a second, noisier estimate of the same thing. What it was genuinely reaching for — "unusual versus recent history" — is now W3 on the Warning axis, computed as a rate of change, which is where deterioration belongs. Removing it moved State's average by −0.4 and its maximum by −3.8, left Warning bit-identical, and did not shift any band threshold.
A long-history alternative (BAA10Y, Fed-published, 7,712 observations back to
1997) was considered and rejected: ranking an HY spread against investment-grade
history is not a coherent statistic, and it would rescue a leg that is redundant
anyway.
Every snapshot now records data_quality.credit_history_days and
vix_history_days. This defect was invisible for roughly three months because
nothing asserted the window the code claimed; the spans make a future upstream
truncation show up in the record instead of quietly reshaping a sensor.
Survivorship caveat. The basket was frozen 2026-07-15 but the calibration window reaches back to 2024, so names were partly selected for having done well. Every distribution above inherits that bias. It is the same bias v2 carried, so the v2/v3 comparison is like-for-like, but the absolute band shares are optimistic.
Point-in-time record
The first run under a new METHODOLOGY rebuilds the latest 400 trading sessions
with sufficient sensor warm-up; routine runs thereafter insert/update only the
latest trading date. The history API and main chart show only snapshots matching
the current methodology, so a bump reseeds the series rather than splicing two
formulas into one line.
The fundamental overlay keeps its effective date (normally the next session after
collection) and is never replayed backward, so a rebuild cannot stamp today's
observation onto historical snapshots. Because the observation is stored in a
single slot, a refresh replaces the previously effective record: the snapshot
therefore reports the overlay as pending until the new effective date, and the
live reading additionally carries fundamental_context so a just-collected
observation is visible immediately rather than appearing to have done nothing.
Each snapshot stores the fixed basket symbols, hash, and freeze date. Reconstructed history before that freeze date is retrospective/exploratory.
Warning study
The study calls the outcome a 10% correction, not a regime break. The first
70% of sessions freezes the 80th-percentile warning threshold; alarm episodes are
measured on the final 30%. Because v3 dropped fundamentals from the score, the
study now measures exactly the live Warning score rather than a technical-only
approximation of it, and both are computed from one shared sensor definition
(warning_sensor_scores) so they cannot drift apart.
A cached report is discarded when its methodology no longer matches, so the panel reverts to "not run yet" after a bump rather than showing stale numbers. Re-run the Event Study job after cutting over to v3.
Operator rule
Quadrant alerts default off for new/reset configurations. When enabled they require fresh inputs, at least 75% coverage on both axes, two consecutive daily confirmations, hysteresis, and cooldown. Every alert states: Risk thermometer — not a trade signal.