Five risk states, plus WHIPSAW and RESOLVED as labels added to reports. Each with defined activation logic and validated precision (1990–2025). Not investment advice.
The Market Risk Classifier assigns a risk state to every US trading day. Each risk state has defined trigger conditions and a scored precision record.
| Risk State | Activations | Hits | FP | Precision | Frequency |
|---|---|---|---|---|---|
| CRISIS | — | — | — | — | — |
| SHOCK | — | — | — | — | — |
| ELEVATED | — | — | — | — | — |
| SHIFTING | — | — | — | — | — |
| STABLE | Baseline classification. Warning states occupied 14.5% of publication sessions. | — | |||
| WHIPSAW | 114 | 108 | 6 | 94.7% | — |
| RESOLVED | 75 | 59 of 75 | 16 of 75 | 78.7% | — |
Historical backtested performance (1990-2025). Precision = hits / activations. BD = NYSE/Nasdaq trading days.
Per-state counts and precision for CRISIS, SHOCK, ELEVATED, and SHIFTING are not among the current facts. The WHIPSAW row counts STABLE holds through qualifying VIX scares, the holds that faded, and the holds that later turned dangerous. The RESOLVED row counts early stand-downs, those that held the five-session durability test, and those that failed it. Both are scored on the corrected publication clock and explained on the Validation & Methods page.
What each risk state means, when it activates, and how institutional teams use it. Severity order: CRISIS > SHOCK > ELEVATED > SHIFTING > STABLE.
Crisis-grade classification for sustained extreme market dislocations. Ultra-selective by design. Activates when multiple environmental and market stress thresholds breach simultaneously. Historically observed during VIX ≥ 35, SPX declines ≥ 3% in 5 days or ≥ 6% in 10 days.
Institutional use: crisis playbook activation, pre-market risk committee awareness, scenario planning for extreme conditions.
Short-duration volatility expansion. Captures sharp, rapid VIX increases that typically resolve within a few trading days. Median episode duration: 3 business days.
Institutional use: tactical hedging awareness, portfolio rebalancing context, short-window risk committee notification.
Advisory-tier elevated stress. Wider net, lower precision. Conditions warrant heightened vigilance but have not reached critical thresholds. Episodes average 5 trading days.
Institutional use: early awareness for risk committees, intermediate classification between routine and critical, scenario planning before potential escalation.
Regime transition classification. The system detects conditions moving away from STABLE, typically with a multi-day lead before market dislocation. Most frequent non-STABLE risk state.
Institutional use: early warning for portfolio positioning, hedge activation before spreads widen, transition context from STABLE to stressed conditions.
Baseline classification. Active when no stress or transition rules are firing. Represents routine market conditions. Warning states occupied 14.5% of publication sessions in the historical record, so STABLE is the usual state.
STABLE is not a prediction of low risk. The classification can shift to ELEVATED or higher within a single session. STABLE means the system currently sees no active stress signal.
Sub-state of STABLE. Activates when VIX rises 25%+ over five sessions while the system holds STABLE. The system has independent environmental data indicating the scare is probably noise rather than a genuine regime change.
An Event Risk Brief is issued and tracks whether the system or the market proves correct. Historically, 108 of 114 STABLE holds through qualifying VIX scares faded (94.7%).
Sub-state of STABLE. Activates when the system returns to STABLE after a real escalation episode (ELEVATED, SHOCK, or CRISIS) while VIX remains elevated above baseline (VIX ≥ 20). The system is saying the crisis has ended before conventional volatility signals confirm it.
The current record counts 75 RESOLVED episodes since 1990. Mindforge returned to STABLE before the Cboe Volatility Index closed below 20 in 68 of 75 of them, and 59 of 75 early stand-downs held the five-session durability test. When a RESOLVED call is early, the system re-escalates and catches the resumption.
Event-driven briefings issued when market conditions and the daily classification form a defined situation. Not a daily report. Issued only when there is something to document.
| Report Type | Trigger | What It Tracks |
|---|---|---|
| Divergence | VIX spikes or SPX falls while the system holds STABLE | Whether the system or the market proves correct |
| Escalation | The system reclassifies from STABLE to a stress risk state | The transition, its market context, and historical analogs |
| Recovery | The system returns to STABLE after a stress episode | The full cycle from departure to resolution |
Each report type opens when its trigger condition is met and closes when the situation resolves.
Classifications are produced by a rules-based engine using versioned rule definitions. One classification per trading day, published pre-market (~07:30 ET).
Research use only. Not investment advice. Past performance ≠ future results. Mindforge is not a registered investment adviser. Full terms · Methods
