Market regimes can be described as recurring market conditions over time, with bull- and bear markets being the most familiar ones. Bull markets are characterized by steadily rising prices, low volatility, and short-lived pullbacks. Bear markets often see fast or even longer-lasting declines, interrupted by stronger bounces. Although identifying a market regime in hindsight is relatively straightforward, it’s important to bear in mind that a pullback in a bull market might signify the beginning of a bear market, while a bounce could already signal the end of a bear market. If navigated correctly, both market regimes offer extremely compelling returns.
With this bundled information, we pinpoint the market’s current position on a predefined map of market regimes. For instance, a ‘Very High Reward Market Regime’ indicates a strong uptrend, supported by positive signals in trend and trend quality indicators, along with increasing smart money positions.
We classify markets into six regimes, ranging from very positive to very negative, each validated with specific risk-return characteristics. For example, ‘Very High Reward Market Regime’ markets typically yield positive returns in 85% of cases, while bull markets don’t usually start in ‘High or Very High-Risk’ Market Regimes. We conduct this analysis for two timeframes, recognizing the different approaches of tactical traders and strategic buy-and-hold investors.
Additionally, we ensure full transparency throughout the process, from single indicator signals to aggregated performance factors and market regimes, along with their corresponding performance statistics.
The signals from our indicators form the foundation for determining market health conditions. Their signals are organized by type and ranked by timeframe, making it easy to analyze market health conditions.
Profitable market regimes are built on the foundation of market health, derived from bundling dozens of well-tested market indicator signals.
Market Health Indicators combine dozens of trend, trend quality, and sentiment signals across different timeframes. Scores on a 0 to 100% scale represent signal positivity. Below 50% indicate a negative outlook, while above 50% signal positive market health. By combining short- to mid-term and mid-term to long-term market health readings, the specific market regime is determined.
By combining short- to mid-term and mid-term to long-term market health readings, the specific market regime is determined. The Tactical Market Regime is built upon the combination of short- to mid-term market health, while the Strategic Market Regime is based on the combination of mid- to long-term market health.
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