Glossary term
Regime
A persistent market state defined not by the calendar but by the combination of volatility, correlation, breadth and momentum. Risk-on, risk-off and transition are the three canonical regimes. Closelook's Money Temperature composite classifies the live regime across calm / warning / stress. See the full Market Regime entry for the Closelook framework.
Definition & Context
A regime is a durable market state in which the usual statistical relationships — correlations across assets, volatility levels, breadth, momentum persistence — behave consistently. Regimes do not map to the calendar: they begin and end at inflection points in those statistical relationships, not at year-ends or central-bank meetings. The simplest framework partitions markets into risk-on (correlations compressed, vol low, breadth expanding), risk-off (correlations spike to 1, vol elevated, breadth narrows) and transition (mixed signals, elevated realised volatility on pullbacks, re-risking on rallies).
Regime analysis is important because strategies that work in one regime often lose money in another. Momentum works best mid-regime; mean-reversion works in late-regime and transitions; buying-the-dip works until it does not. The hardest question in asset management is not picking the right strategy but recognising, in real time, that the regime has shifted.
Why It Matters for Investors
The Closelook Money Temperature engine classifies the live regime across eight macro instruments and outputs a composite 0–100 score plus a label (calm / warning / stress). The Weekly Signal framework then reweights exposures conditional on regime: stress raises cash targets, compresses options-selling size, and shades toward defensive sector tilts. See the full Market Regime entry and the Money Temperature 101 for the complete Closelook approach.
Related Concepts
Regime is operationalised by Money Temperature, classified under Market Regime, and sensed via Breadth and Sentinel Tickers.