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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