/exposure-coach

Regime-to-Exposure Mapping

Overview

This document maps macro regime states to baseline exposure ceilings and bias recommendations. The macro regime provides the foundational context; other signals adjust within these bounds.

Regime Definitions

Broadening

Characteristics:

• RSP/SPY ratio rising (equal-weight outperforming cap-weight)
• Uptrend participation > 40%
• Multiple sectors contributing to gains
• Credit spreads stable or tightening

Baseline Exposure: 80-100% Bias: Growth-tilted Action: Aggressive new entries allowed

Concentration

Characteristics:

• RSP/SPY ratio falling (mega-caps dominating)
• Uptrend participation 25-40%
• Leadership in few sectors (Technology, Communications)
• Narrow breadth despite index gains

Baseline Exposure: 60-80% Bias: Quality Growth Action: Selective entries in leaders only

Transitional

Characteristics:

• Cross-asset signals conflicting
• Regime indicators at boundary conditions
• High volatility in breadth measures
• Sector rotation accelerating

Baseline Exposure: 40-60% Bias: Neutral / Defensive Action: Reduce new entries; hold quality positions

Inflationary

Characteristics:

• Yield curve steepening
• Commodity strength (especially energy, metals)
• Value outperforming growth
• Real assets leading

Baseline Exposure: 50-70% Bias: Value / Real Assets Action: Rotate to inflation beneficiaries

Contraction

Characteristics:

• Distribution days accumulating
• Uptrend participation < 20%
• Defensive sectors (Utilities, Staples, Healthcare) leading
• Credit spreads widening
• Institutional selling detected

Baseline Exposure: 10-30% Bias: Defensive / Cash Action: CASH_PRIORITY; protect capital

Regime Transition Signals

Broadening → Concentration

• RSP/SPY rolling over while SPY makes new highs
• Breadth divergence (fewer stocks at highs)
• Reduce exposure ceiling by 10-20%

Concentration → Transitional

• Mega-cap leaders showing distribution
• Volatility expansion
• Reduce exposure ceiling by 15-25%

Transitional → Contraction

• Credit spreads widening
• Safe haven flows (bonds, gold, yen)
• Reduce exposure ceiling by 25-40%

Contraction → Transitional

• Distribution day count resetting
• Breadth thrusts
• Begin rebuilding exposure cautiously

Transitional → Broadening

• RSP/SPY ratio turning up
• Uptrend participation expanding
• Aggressive exposure increase warranted

Exposure Adjustment Rules

Within-Regime Adjustments

Even within a regime, the exposure ceiling adjusts based on:

1. Breadth Confirmation

   • Breadth score aligning with regime: No adjustment
   • Breadth diverging negatively: -10% to ceiling
   • Breadth diverging positively: +5% to ceiling

2. Top Risk Level

   • Low top risk: +10% to ceiling
   • Elevated top risk: -15% to ceiling
   • Critical top risk: Force CASH_PRIORITY regardless of regime

3. Institutional Flow

   • Strong buying: +5% to ceiling
   • Strong selling: -10% to ceiling

4. FTD Anomalies

   • Critical FTD level: -15% to ceiling
   • Forces extra caution on new entries

Bias-to-Sector Mapping

Example Scenarios

Scenario 1: Early Bull Market

• Regime: Broadening
• Breadth: Strong (score 85)
• Top Risk: Low (score 90)
• Uptrend: Expanding (score 80)

Result:

• Exposure Ceiling: 95%
• Bias: Growth
• Recommendation: NEW_ENTRY_ALLOWED

Scenario 2: Late Cycle Concentration

• Regime: Concentration
• Breadth: Weak (score 45)
• Top Risk: Moderate (score 55)
• Uptrend: Narrow (score 35)

Result:

• Exposure Ceiling: 55%
• Bias: Quality Growth
• Recommendation: REDUCE_ONLY

Scenario 3: Market Top Formation

• Regime: Transitional
• Breadth: Deteriorating (score 30)
• Top Risk: High (score 25)
• Uptrend: Collapsing (score 18)

Result:

• Exposure Ceiling: 15%
• Bias: Defensive
• Recommendation: CASH_PRIORITY

Integration with Other Signals

The regime provides the framework; other signals fine-tune:

1. Theme Detector -- Identifies which themes to favor within bias
2. Sector Analyst -- Confirms sector leadership alignment
3. Institutional Flow -- Validates smart money direction
4. FTD Detector -- Flags systemic stress

When signals conflict:

• Default to more conservative posture
• Reduce confidence level
• Flag conflicts in rationale