SIGNAL CHANGE: Macro Regime Engine Risk Off

Selling 40% position in $SPYM, 20% position in $ACWX.

Well folks, the time has come. The Macro Regime Engine just flipped risk-off for the 37th time in its history.

I mentioned this in last weeks report on Friday that the internals for the Macro Regime Engine were beginning to lean bearish. As of yesterdays close we got a confirmed sell signal on the S&P500.

Since the macro data (5d bar needs to close for those votes to come in) was updating this morning, I decided to wait to the opening bell to see if anything would change and it hasn’t (+2 bullish votes was not enough to override).

This is the first signal change since December 7th, 2025. The market has gone basically nowhere since then and the trade closed down roughly -1.0%. The portfolio has stayed relatively flat thanks to my Bull Put spread sleeves I had operating during this risk-on window (if you’d like to know more about that please leave a comment or DM me, if there’s enough interest I’ll shoot a quick video about it).

Current portfolio (down -0.45% [45bps] on the year):

The remaining ~$70,000 cash balance from todays sale will be put into USFR 0.00%↑ tomorrow morning.

Only remaining position is in Gold/Gold Miners ($GDX) because Gold remains bullish from a trend perspective.

Now I think it’s important to share that after running some statistical analysis last night on similar Macro Regime Engine signal changes there is something to be said about expectations.

The natural question: is this a head-fake or the real thing? The base rates say it’s roughly a coin flip.. 47% of all risk-off signals have resolved within 30 days, while 28% became protracted (90+ days). But the base rate misses the point.

The asymmetry is what matters.

When the system is wrong, the average cost is ~2.8% of missed upside over a few weeks.

When it’s right, it avoids drawdowns averaging 10%+ over months.

Across the full backtest, the cumulative drawdown avoided by the major protective signals (dot-com, GFC, COVID, 2022 bear) outweighs the cumulative opportunity cost of every fake-out by more than 67 percentage points. That’s the entire thesis of this system.. survival is alpha, and the math behind it is not close.

What makes this signal worth watching closely is the pattern leading into it.

The November risk-off lasted just 19 days before re-entering.. a clear fake-out. The subsequent risk-on trade (Trade 37) ran 92 days and lost 0.90%. Now we’re risk-off again.

This “double-tap” signature: short fake-out, short losing trade, new risk-off.. has shown up before. In late 2021, the engine fired two quick fake-outs in September before the November signal that kept us out of a 432-day, -11% decline. In 2018, a similar cluster of chop eventually resolved into the Q4 selloff.

The counterexample is 2023, where the chop was just noise and the market powered higher. Every major protective signal in this system’s history was preceded by exactly this kind of noise. The system can cry wolf.. until it doesn’t.

Hope that helps set expectations, if we get a sustained rally into the end of the week or next week, expect a risk-on signal to flip back and get us back long but I’m not going to sit here and predict what the engine might do, I will continue to follow the signals ruthlessly.

Bitcoin has also been showing some relative strength which is great to see and we’re inching closer to a potential bullish signal on the 8th rule but we’re just not there yet.

Small bonus/side note.. you can now get live access to some of my most popular charts & models free on my website: DurdenBTC’s Bitcoin Charts, these are updated daily.

And to those of you using the new members area even though it’s not technically ready to be released yet, I see you! You sneaky bastards, and I appreciate you. If you have any feedback on the members area please drop me a line.

---

⚔️ Stay Sharp

If you have any questions about the signal change or anything else in this post, drop me a DM on Substack or on X.

— Durden out.

✊🧼