Why Market Regime Matters
Markets do not behave the same way under all conditions.
The same technical setup, valuation, or news can lead to very different outcomes depending on the surrounding environment.
Ignoring regime context often results in:
- Overexposure during risk-off periods
- Underexposure during favorable conditions
- Misinterpretation of signals
Understanding market regime provides the context in which all signals should be interpreted.
Defining Market Regime
At T11.11.11 Analysis, market regimes are classified into three broad states:
1. Risk-on
- Liquidity expanding
- Volatility contained or declining
- Broad participation across assets or sectors
- Capital flows toward growth and beta
In this regime, trend-following and momentum strategies tend to perform well.
2. Neutral
- Mixed liquidity signals
- Range-bound price action
- Selective leadership
- Increasing dispersion
This regime favors selectivity, not broad exposure.
3. Risk-off
- Liquidity contracting
- Volatility rising
- Weak market breadth
- Capital flows into defensive or cash-like assets
Preservation of capital becomes more important than return maximization.
Liquidity as the Primary Driver
Liquidity conditions often lead price behavior.
Rather than reacting to price moves, regime analysis focuses on whether liquidity is:
- Expanding
- Stable
- Contracting
Sustained market advances are rarely possible under tightening liquidity.
Conversely, improving liquidity often precedes recoveries.
Volatility and Breadth
Two additional components help confirm regime shifts:
Volatility
- Rising volatility often signals stress and risk aversion
- Suppressed volatility supports risk-taking behavior
Market Breadth
- Strong advances require participation
- Narrow leadership increases fragility
- Divergences between price and breadth are early warnings
Price can rise even as internal conditions deteriorate — temporarily.
Regime vs Prediction
Market regime analysis is not prediction.
It does not attempt to forecast:
- Exact tops or bottoms
- Short-term price movements
- Event-driven outcomes
Instead, it helps answer:
- Is risk currently rewarded or punished?
- Should exposure be increased or reduced?
- Is the environment supportive or hostile?
This approach shifts focus from certainty to probability.
Application to Vietnam Market
For markets like Vietnam, regime awareness is especially important:
- Higher sensitivity to global liquidity
- Strong sector rotation effects
- Concentrated leadership at times
Local price action must be evaluated within a global risk framework, not in isolation.
Key Takeaways
- Market regime defines the playing field
- Liquidity drives cycles before price reacts
- Volatility and breadth provide early warnings
- Risk management begins with environment awareness
Before asking what to trade, always ask:
What regime am I trading in?
T11.11.11 Analysis 