Risk Appetite surged from 0 to +1, a 1.5-point improvement that tips the aggregate score positive and flips the modifier from Neutral to Tailwind. The catalyst? Post-revision NFP 3-month average recovered and doubled to 78k. The hiring freeze narrative from Issues #008-009 looks increasingly like a statistical artifact.

The core pillars remain unchanged: Growth, Inflation, Policy, and Liquidity all score 0. The improvement is entirely in the modifier space. And the same three currency signposts that have been flashing warnings since Issue #005 remain triggered.

Current Regime: Neutral / Chop | Aggregate Score: +1 | Modifier: Tailwind | Conviction: Minimal

Growth (0, trend ↑): Post-revision NFP 3-month average recovered to 78k from 33k, the data point that drove the narrative shift. ISM New Orders minus Inventories at +5.5 positive spread. Real M1 at +8.6bn adds soft landing fuel. Copper/gold ratio remains a negative at 0.00115, still flashing fear. GDPNow at 3.7% well above trend. The divergence check shows Soft Landing Risk.

Inflation (0, trend ↓): Pipeline clearing continues. CRB Commodity Index at 385.9 rolling over. 5Y5Y forward inflation at 2.12% anchored. Supercore PCE at 3.5% (down from 3.6%), the metric Powell watches most. Tariff pass-through remains Contained. Momentum alert shows Deceleration (3M < YoY).

Policy (0, trend →): Fed on hold at 3.5-3.75% range. Chicago Fed NFCI at -0.563 firmly “Very Loose.” 10Y-3M spread narrowed to 36bps (not recession signal). Real Fed Funds at 0.85%, neutral. Fiscal impulse flipped positive (+4.3 YoY). Powell’s term ends May; Warsh is the frontrunner to replace.

Liquidity (0, trend ↑): Net liquidity received $12.2B injection, second consecutive week. Fed Balance Sheet at $6,622B (+$16B). RRP at $0.38B essentially exhausted. SOFR-Repo spread near 0, no plumbing stress. MOVE Index at 70.1 (elevated but normal). BTC smoke alarm aligned with net liquidity.

USD/JPY improved to 153.19 from 157.09, a 4-yen pullback that reduces BoJ intervention risk. Still triggered. These signposts have been active for ten weeks, background noise until they’re not.

Velocity at +1.5 shows momentum toward risk-on regimes. Distribution normalising so no longer coin flip odds.

SPY fell 1.28% this week. The Greed Ratio deteriorated further. VIX jumped from 17.76 to 20.6 and yet Risk Appetite scored its biggest weekly improvement since we started publishing. Why?

The dashboard doesn’t score price, it scores the quality of the environment in which prices move. Prices can fall in a healthy environment (dip to buy) or rise in an unhealthy one (trap to sell). The validation system distinguishes between them.

What the dashboard sees: Credit isn’t cracking, HY spreads widened 5bps to 292, far from the 400 trigger. Breadth holding - participation at 58.7%, net highs showing potential signs of thrust. Vol normal - VIX at 20.6 elevated but term structure in healthy contango. NFP recovered, the data point that drove Risk Appetite to -1 is reversed.

What could make it wrong: Greed Ratio still deteriorating at 1.298, institutional money rotating defensive even as validation checks pass. If this continues and credit starts widening, validation fails fast. Signposts haven’t cleared, ten weeks of warnings the checks aren’t capturing. One pillar carrying the regime is fragile, we’ve seen this movie before in Issue #005, which resolved with the modifier collapse in Issues #008-009.

The dashboard is probably right about environment quality. But the Greed Ratio deterioration is a warning. If defensive rotation accelerates and credit confirms, the regime read changes fast.

Equities: HIGH QUALITY verdict creates buy-the-dip setup. SPY below 50-day but above 100-day. IWM at 3.5 ribbon (smalls leading). Greed Ratio deterioration suggests quality over beta.

Bonds: TLT showing STRONG UP with fresh death cross, an unusual combo. 10Y-3M spread narrowed to 36bps (not recession signal). Duration in limbo.

FX: USD/JPY improved but still in carry territory. DXY death cross fresh. Dollar weakness supports EM and commodities.

Commodities: Gold at $462.62, the structural bid continues. Copper/gold ratio still flashing fear at 0.00115, reflation lacks confirmation.

Crypto: BTC at $69,056 falling but aligned with net liquidity. Risk Appetite +1 is neutral-to-supportive, better than headwind but not a tailwind.

NYSE closed Monday for Presidents’ Day. Here’s what matters for the regime.

FOMC Minutes (Wednesday): The January meeting saw two dissents, Miran and Wallen, in favor of cutting. The minutes will reveal how close the rest of the committee was to joining them and whether the “loosely neutral” language Powell used reflects broader consensus. With Powell’s term ending in May and Warsh the frontrunner to replace him, any hints about the transition or the Fed’s thinking on tariff pass-through will move rates. Currently 93.6% probability of a June cut priced in.

Walmart Earnings (Thursday pre-market): The world’s largest retailer reports Q4 FY26. Walmart has been a consistent outperformer as value-seeking consumers across income levels trade down. Watch for: tariff pass-through commentary (about a third of what Walmart sells comes from imports), SNAP benefit impacts from the shutdown and whether the general merchandise recovery continues. Target’s struggles contrast sharply with Walmart’s momentum, the spread tells you where the consumer is.

S&P Global PMI Flash (Friday): February preliminary readings will be the first real-time gauge on whether the soft CPI print and jobs recovery translate into activity. Manufacturing has been weak; services holding up. A miss here would feed the “growth scare” narrative and potentially shift the Growth pillar.

Software Stabilisation Watch: IGV is 31% below highs and deeply oversold. JPMorgan and Goldman both called the selloff overdone. If software bounces, it could unwind the defensive rotation visible in the Greed Ratio and strengthen the Risk Appetite reading. If it continues lower, watch for credit contagion—the validation checks are passing now, but that can change fast.

Growth turns positive: ISM Services >55, NFP 3M avg >100k → Goldilocks.

Risk Appetite collapses: Greed Ratio FAIL, HY >350, VIX >25 sustained.

Signposts clear/cascade: USD/JPY <152 removes risk; BoJ intervention resolves painfully.

Credit cracks: HY >400bps triggers validation failure.

We’re in positive territory for the first time since mid-January. Risk Appetite broke out. NFP recovered. Modifier flipped to Tailwind. All four validation checks pass. Aggregate at +1.

But the structure is fragile. One pillar carrying the regime. Same three signposts triggered for ten weeks. Greed Ratio still deteriorating. Equity prices falling while the environment improves.

The 58% Stay Current probability is the highest since launch. Validation says the dip is buyable. Signposts say structural risks persist. Both true simultaneously.

See you next Sunday.

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