Market Regimes

Market condition identification using Hidden Markov Models

Overview

Market Regimes uses Hidden Markov Models (HMM) combined with rule-based detection to identify the current market condition for both the overall market and individual stocks. Understanding the regime helps you adapt strategies to current conditions rather than applying a one-size-fits-all approach.

Regime Types

Regime	Characteristics	Typical Strategy
Bull Market	Sustained uptrend, rising moving averages, positive breadth	Trend-following, momentum strategies
Bear Market	Sustained downtrend, falling averages, negative breadth	Defensive positioning, hedging, short-biased
Sideways / Choppy	Range-bound, lack of clear trend, mixed signals	Mean-reversion, range trading
High Volatility	Large daily swings, elevated VIX, uncertainty	Reduce position size, wider stops, hedging
Low Volatility Accumulation	Quiet market with tightening range	Prepare for breakout, accumulate quality positions

HMM Detection

The Hidden Markov Model analyzes historical price, volume, and volatility patterns to probabilistically classify the current regime. The model also produces transition probabilities showing the likelihood of moving from one regime to another.

Note

Transition probabilities help anticipate regime changes. If the model shows a 40% probability of transitioning from Bull to Sideways, it may be time to tighten risk management even though the current regime is still bullish.

Global vs Symbol Regimes

Global Regime

The overall market regime based on major indexes and breadth indicators. This sets the baseline for your market outlook.

Symbol-Level Regimes

Individual stocks can be in different regimes than the overall market. A stock may be in a bull regime during a broader sideways market if it has strong sector-specific catalysts.

How to Use

●Check the global regime first to understand the overall market environment
●Review individual stock regimes for positions you are researching
●Adapt your strategy to match the current regime (momentum in bull, mean-reversion in sideways)
●Monitor transition probabilities for early warning of regime changes
●Use regime awareness to adjust position sizing and risk parameters

Combining with Other Tools

●In Bull regimes: favor momentum strategies from Technical Ranking and ALEEP Signals
●In Sideways regimes: focus on mean-reversion setups from Pattern Signals
●In High Volatility regimes: reduce position sizes and focus on defensive Screener filters
●Cross-reference with Macro Economics regime data for a dual macro+technical regime assessment
●Use the regime to inform portfolio decisions — aggressive presets in bull markets, defensive in bear markets

This platform provides data and analysis tools for educational and informational purposes only. Nothing on this platform constitutes financial advice, investment recommendations, or solicitation to buy or sell any securities. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.