Macro regime 3layer

Macro Regime 3-Layer Detector

Classify the US equity market regime as BULL / SIDEWAYS / BEAR using a 2-of-3 majority vote across three independent, mathematically uncorrelated signals.

Most regime detectors collapse to a single signal (e.g. "is index above its MA200?"). That makes them brittle — a single bad data point flips the regime. A three-signal vote is more robust: a regime call only changes when at least two layers agree.

Note: Not financial advice. Historical backtests do not guarantee future results.

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The three layers

Layer	Signal	Bull vote when	Bear vote when	Sideways vote when
1. Trend	QQQ ADX(14) + DI±	ADX ≥ 25 and DI+ > DI-	ADX ≥ 25 and DI+ < DI-	ADX < 20
2. Breadth	% of S&P 500 above MA200	breadth > 60%	breadth < 40%	40% ≤ breadth ≤ 60%
3. Volatility	VIX / 20-day realized vol of S&P 500	ratio outside [0.8, 1.2] and QQQ > MA200	ratio outside [0.8, 1.2] and QQQ ≤ MA200	0.8 ≤ ratio ≤ 1.2

Each layer votes independently. Final regime = 2-of-3 majority. Sideways takes priority on tie (two sideways votes → SIDEWAYS overall).

Why three signals

• ADX measures trend strength but not direction reliability when weak.
• Breadth measures whether the rally is participatory or led by a few mega-caps.
• VIX/RV measures whether implied fear matches realized turbulence — divergence often precedes regime shifts.

Any single signal can mislead. Two agreeing signals is much harder to fake.

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Step 1: Ensure dependencies

import subprocess, sys
for pkg in ("yfinance", "pandas", "numpy"):
    try:
        __import__(pkg)
    except ImportError:
        subprocess.check_call([sys.executable, "-m", "pip", "install", "-q", pkg])

Step 2: Run the detector

from macro_regime import detect_market_regime

result = detect_market_regime()
# {
#   "regime": "BULL" | "SIDEWAYS" | "BEAR",
#   "votes": ["BULL", "BULL", "SIDEWAYS"],
#   "layers": {
#       "1_trend":      {"vote": "BULL",     "adx": 28.4, "plus_di": 24.1, "minus_di": 18.3},
#       "2_breadth":    {"vote": "BULL",     "breadth_pct": 64.2},
#       "3_volatility": {"vote": "SIDEWAYS", "vix": 17.2, "realized_vol": 18.1, "ratio": 0.95},
#   },
#   "context": {"qqq_close": 540.1, "qqq_ma200": 510.4, "qqq_above_ma200": True}
# }

Default fetches:

• QQQ + ^VIX + S&P 500 sample (50 large caps for breadth — fast, ~10–20 seconds).
• For higher accuracy use detect_market_regime(use_full_sp500=True) — downloads the full S&P 500 universe (~3–5 minutes).

Step 3: Use the result as a STRATEGY ROUTER (not a gate)

The naive use — "only trade longs in BULL regimes, stay flat in BEAR" — turns out to destroy mean-reversion edge. An 8-year, 843-signal backtest shows BEAR-regime mean-reversion signals actually outperform BULL-regime ones:

Regime	Mean 5d	Win rate (5d)
BULL	+0.80%	55.5%
SIDEWAYS	+2.07%	67.7%
BEAR	+2.26%	65.6%

So treat the regime as a router, not a gate:

result = detect_market_regime()
regime = result["regime"]

if regime == "BULL":
    enable_momentum_breakout()       # trend-following needs a trending tape
elif regime == "SIDEWAYS":
    enable_mean_reversion()          # chop is mean-reversion's home turf
else:  # BEAR
    enable_mean_reversion()          # deepest oversold = strongest snap-back
    # Staying flat in BEAR is a risk-tolerance choice, not a signal-quality one.

See README.md for the full backtest table and reasoning.

Step 4: Respond to the user

Present the breakdown so the user understands why the regime is what it is. Don't just say "BULL" — show which layers agreed.

Current regime: BULL (2-of-3 vote)

Layer	Signal	Vote
1. Trend (ADX 28.4 / DI+ 24.1 > DI- 18.3)	Strong uptrend	🟢 BULL
2. Breadth (64.2% of S&P 500 above MA200)	Broad participation	🟢 BULL
3. Volatility (VIX 17.2 / RV 18.1 = 0.95)	Implied ≈ realized	🟡 SIDEWAYS

Layer 3 disagrees but the trend + breadth majority drives the call. Momentum strategies are currently allowed.

Caveats to mention

• This is a macro filter, not a single-stock signal. It tells you the environment, not what to buy.
• Thresholds (25/20 for ADX, 60/40 for breadth, 0.8/1.2 for VIX/RV) are calibrated for US equities and may need adjustment for other markets.
• The sample-of-50 breadth is a reasonable proxy; full S&P 500 is more accurate but slower.

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Real-world example

This skill was extracted from the quant-scanner project where it is the top-level macro gate: BULL allows mean-reversion + momentum, SIDEWAYS allows mean-reversion only, BEAR blocks all new long entries. Combined with the vix-regime skill for VIX-band overlay, it forms a two-stage macro filter.