The Market Monitor has registered a critical divergence this week, with the primary model shifting to Risk OFF while the secondary model remained in Neutral. This marks the first significant internal fracture since the May 2025 upgrade and warrants close attention.
Regime progression:
06 February 2026: Risk ON — Moderate (Primary) / Neutral (Secondary)
13 February 2026: Risk OFF (Primary) / Neutral (Secondary)
This split configuration is significant. The primary model has fully capitulated, while the secondary model has deteriorated within Neutral territory typically preceding broader regime transitions.
Sequence of deterioration
The deterioration unfolded through a measured broadening of internal weakness over recent weeks, culminating in Friday’s cross-confirmation.
Late January – Early February: First signs of weakness
- Multiple core metrics were already in Risk Off territory prior to this week, including relative performance measures across key segments of the market. These held the regime in a fragile Risk ON–Moderate stance.
- Large-cap growth leadership had already begun showing signs of non-participation relative to the broader market.
Week ending 06 February: Warning Signs Accumulate
- A key defensive sector rotation signal turned Risk Off, confirming that capital was beginning to move toward safer segments of the market relative to the broader index, a subtle but meaningful shift toward caution.
- Trend efficiency measures turned negative, indicating that price action across the market was becoming increasingly erratic and less sustainable.
- Trend quality metrics moved from constructive to uncertain, representing a degradation in the structural integrity of the advance. Markets with poor trend quality rarely sustain upside moves.
Week ending 13 February: Primary Model Flips
- Multiple additional metrics turned Risk Off simultaneously. Defensive behaviour was no longer isolated.
- Low-beta names began outperforming high-beta names, a classic sign that risk appetite is fading and institutional money is rotating toward stability over participation.
- The primary model, which had previously been Risk ON, moved decisively into Risk OFF.
- Currency FX stress measures remained elevated, adding an additional layer of cross-asset confirmation to the equity-level deterioration.
At this point, the configuration is clear: breadth, sector rotation, and defensive asset behavior have all moved into a cautious stance, while top-line momentum and trend metrics are only now beginning to waver.
Interpretation
This is not yet a full Risk OFF regime, but it is the precise structural setup that historically precedes one. The primary-secondary models’ simultaneous weakness offers analytical clarity as the market is no longer healthy internally, even if indices have not yet broken down.
The character of the market has shifted from “broad-based improvement with returning risk appetite” to “fracturing internals with deteriorating participation.” The primary model’s move into Risk Off confirms that the deterioration is no longer isolated to a few metrics but has reached critical mass.
The key defensive signals, rotations into defensive sectors, low-beta outperformance, and persistent currency stress, indicate that capital is quietly rotating toward safety. The Offensive vs. Defensive sector relationship has broken down. High-risk liquidity measures have not recovered. This is not a healthy consolidation; it is a structural weakening masked by index-level resilience.
Recommended posture
- Raise cash aggressively and tighten all stop-loss levels
• Reduce exposure to momentum-driven names showing relative weakness
• Hedge remaining long exposure or move to the sidelines until the primary-secondary divergence resolves to the upside
• Do not average into pullbacks, wait for either primary model confirmation or a full secondary model recovery
Summary
The market experienced a critical internal fracture this week. Defensive rotations, deteriorating trend quality, and weakening participation all point to a market that is weaker than its index levels suggest. The framework recommends an immediate shift to capital preservation, aggressive stop tightening, and a reduction in exposure until the internal picture clarifies.