Detecting Market Regimes: Trend, Sideways and Volatility

What is market regime analysis?

Market regime analysis classifies the current market state: Is the market in an uptrend, a downtrend, or a sideways phase? How high is volatility? The regime determines whether all other signals are reliable — or whether they drown in noise.


The 3 regime types

Regime Characteristics Implication
Trend up SPY/QQQ above 200-MA, VIX < 20, broad market breadth Long signals more reliable
Trend down SPY/QQQ below 200-MA, VIX > 25, indices falling Short signals more reliable
Sideways Narrow range, VIX between 15–25, no clear direction All signals weaker

Core indicators

VIX — Fear Index

The VIX measures the expected 30-day volatility of the S&P 500.

VIX Market phase Action implication
< 15 Calm, bull market Long bias — trend-following works
15 – 25 Normal Neutral — be selective
25 – 35 Elevated uncertainty View signals with more skepticism
> 35 Panic / crash All signals unreliable — reduce risk

SPY/QQQ moving averages

  • SPY > 200-day MA: Bull market regime — long bias for the overall market
  • SPY < 200-day MA: Bear market regime — short bias, defensive positioning

Market breadth (Advance/Decline)

Is the index rising because of a few large stocks? Or are most stocks rising?

  • Broad rally (> 70 % of stocks above 50-MA) → Healthy, sustainable
  • Narrow rally (< 30 % of stocks above 50-MA) → Warning sign, fragile

How 360° calculates the regime

VIX score + trend score (SPY/QQQ) + breadth score
→ Regime: Bullish / Neutral / Bearish

Bullish regime  → all long signals +10 % weighting
Bearish regime  → all short signals +10 % weighting
Sideways        → all signals −15 % confidence

The regime acts as a multiplier on all 7 other methods — not as a standalone buy signal.


Limitations of market regime analysis

  • Regime changes are recognized retroactively — the transition is often only clear in hindsight
  • Sector rotations can distort overall market signals (tech falls, energy rises)
  • Macro events (Fed decisions, geopolitics) can change the regime overnight
  • Instruments from the selection universe can move against the market regime — individual momentum can ignore headwinds

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