signal-platform/docs/research/regime-monitor-v3.md

AI/Tech Risk Monitor v3 methodology

Named "Regime Monitor" until 2026-08-07; the filename, the regime_monitor job id, the /regime route and the METHODOLOGY/snapshot fields keep the old word, because those are persisted or externally linked. Only the wording changed.

The AI/Tech Risk Monitor is an observational 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.

Two functions, deliberately: fundamental_overlay is the record and keeps the gate — it runs for every replayed date during a rebuild, so it must never grow a bypass flag. current_observation is the live reading behind fundamental_context, and reports the effective date instead of blanking the content.

Until 2026-08-07 the live reading called the gated function, so a just-collected observation stayed hidden until the next weekday — three days over a weekend — and refreshing appeared to do nothing. That was the opposite of what this section already claimed. Showing it early cannot leak into a published number, because nothing in the overlay is scored (see "Fundamentals left the score").

current_observation gates on observed (a non-null fetched_at, the one field every path writing real content stamps). Without it, the default override — unknown for every hyperscaler and mixed for the reaction — was reported as a live observation with available: true, so the card presented placeholders as a collected reading. Those are the absence of an observation, not an observation of absence. fundamental_overlay never had this problem: no observation means no effective date, which means pending, which already blanks the content.

Each snapshot stores the fixed basket symbols, hash, and freeze date. Reconstructed history before that freeze date is retrospective/exploratory.

Presentation

The page is deliberately thin: two gauges, one chart card, one pillar table, the overlay, and a provenance strip. Time and Path are two projections of the same snapshot series and share one card and one query key — they were previously two panels, which read as two datasets. Methodology rationale lives in this document, not on the page; page text is limited to what changes how the reader interprets today's number. The quadrant dividers rendered in Path view come from quadrant_config and are the same constants the alert path consumes (alert_service), so the chart cannot drift from what actually fires.

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.

Reading the result

The report carries a reliability block and the UI renders its warnings, because the headline numbers invite over-reading in two specific ways.

The holdout is thin. The study detects 11 corrections across 5 years but the 70/30 split leaves only 4 in the test period. Recall is therefore one event away from a materially different headline, and in practice the event that flips is decided by where the frozen threshold happens to land rather than by whether the score saw anything. The v3 cutover run illustrates it: v3 scored 2/4 against v2's 3/4, but "v3 without the credit sensor" scores 3/4 at a higher threshold (35.5) than shipped v3 misses it at (32.3) — because the alarm rule needs a rising edge, and a lower threshold can mean the alarm already fired outside the 20-session horizon and never reset below. Below MIN_EVENTS_FOR_CONFIDENCE holdout events the report says so explicitly.

Some events carry no information at all for comparison: in that run every variant caught 2026-03-06, every variant missed 2026-06-05, and every variant "caught" 2025-11-20 with a 1-session lead, which is coincident rather than a warning.

Sensor coverage can straddle the split. The score renormalises over available sensors, so a training window predating a sensor's history freezes the threshold on a different construct than the holdout is measured against. At the v3 cutover only 39% of training sessions had all three Warning sensors versus 100% of the test period, because credit history begins 2023-07-25.

Restricting the threshold to sensor-matched training sessions was tried and is not the fix: those sessions are a calm recent stretch, so the threshold drops from 32.3 to 22.5 and false alarms rise from 3.3 to 8.6 per year. It trades a coverage bias for a regime-selection bias. The honest position is that the threshold is hypersensitive to window choice at this sample size; the report states its limits rather than pretending to a precision it does not have.

Open calibration questions

Raised 2026-08-07 during the page refactor. None are implemented. Each one changes a published score, so acting on any of them means cutting METHODOLOGY to v4 — which reseeds 400 sessions and discards the cached event study. They are recorded here rather than hand-patched into v3.

1. State's top band is a credit-event band. f2_credit_spreads returns 0.0 — not None — for any OAS below the 3.5 mild anchor, so credit stays available at weight 20 and is not renormalized out. It is simply pinned at zero. Verified: with price, breadth and volatility all pegged at 100 and OAS at the cutover's 2.77, State computes to exactly 80.0 at 100% coverage — the "breaking" threshold to the decimal. So the top State band requires either a credit event or all three remaining pillars simultaneously at maximum. A pure AI/Tech drawdown with calm credit — the scenario this monitor exists to measure — cannot print it with anything to spare. Anchors-only credit was nonzero on 27 of 408 calibration sessions, so that 20-point weight sits at zero roughly 93% of the time. This is structurally the same defect v3 corrected on the Warning axis ("the upper half of the Warning axis was unreachable"), and it means the State bands were fit against a v2 credit distribution that v3 no longer produces.

2. V1 saturates at VIX 30. (vix - 15) / 15 * 100 reaches 100 at VIX 30 and has no resolution above it: VIX 30, 50 and 82 all score identically. That is the same failure mode, at a similar percentile, as the dd_pct * 5 formula this version replaced for pegging at a 20% drawdown. If addressed, it should get an anchor table in the P3 style rather than a rescaled slope.

3. max(P1, P2, P3) defeats P3's anchoring. The max is deliberate ("one capped vote for correlated reads"), but _under_200 is binary, so P1 prints 100 whenever SMH and QQQ are both below their 200-DMA. P3's anchor ladder therefore only resolves anything while price is above the 200-DMA — that is, before the drawdown it measures is underway. Note also that "P3's realized share of State falls from 65% to 40%" is argmax-share accounting, which is a slippery statistic under max().

Fixed 2026-08-07: the OAS fetch window did not cover a rebuild

HY_OAS_WINDOW_DAYS was 400 calendar days, but a rebuild replays leader_series[-REBUILD_SESSIONS:] — 400 trading sessions, about 579 calendar days. The oldest ~180 calendar days of any rebuild therefore got no OAS data at all, so f2_credit_spreads and w3_credit_impulse both returned None. Verified: State then lands at 80% coverage and Warning at exactly 75.0% — MIN_COVERAGE — so both still publish bands. The rebuilt series would look homogeneous while its oldest rows had been scored without credit, the tell being a null data_quality.credit_history_days on exactly those rows.

The window is now 700 days: it must cover the oldest replayed date (~579) plus W3's lookback and slack, while staying under ICE's ~3-year cap so FRED still honours the request. This required no methodology bump — C1 reads oas_values[-1] and W3 reads oas_values[-21], both indexed from the end, so widening only prepends older observations and every live score is bit-identical. Confirmed by evaluating both windows against a varying synthetic series: today's C1/W3 match exactly, while the oldest rebuild row goes from None/None to real values.

Expect credit_history_days on new snapshots to rise from ~400 to ~700. That is the widened request, not new upstream history — and it makes the chip a better truncation canary, since a 700-day request returning ~1095 days' worth is now the visible ceiling.

Widening the window alone does not repair stored history. Routine runs recompute only the latest trading date, and rebuilding was keyed on "no v3 snapshot exists at all" — which is false once the cutover has run — so every row already written would have kept its credit gap indefinitely. SENSOR_REVISION fixes that: it is stamped into each snapshot, snapshots predating it read as 1, and a stored revision below the current one triggers exactly one reseed.

It is deliberately not METHODOLOGY. That constant partitions the history API and discards the cached event study; neither is warranted here, because the study recomputes its Warning series from source (_warning_series calls warning_sensor_scores against freshly fetched prices and OAS) rather than reading snapshots, so a reseed cannot stale it.

The reseed is bounded by REBUILD_LOOKBACK_DAYS in calendar days rather than a session count, because the binding constraint is the OAS fetch: each replayed row needs W3's 20-business-day lookback inside HY_OAS_WINDOW_DAYS. At 672 days the replay reaches ~464 sessions, W3's oldest requirement lands exactly on the first fetched OAS day, and the ~400-session series the v3 cutover wrote is fully covered. A test asserts that relationship so the two constants cannot drift into recreating the gap.

The fix was sequenced deliberately: acting on items 1–3 above bumps METHODOLOGY, which fires rebuilding, which would have baked the credit-less rows into the fresh series. Fixing the window afterwards would mean reseeding twice.

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.