Is regime shift on the way?
Revisiting the 2Y and 4Y rolling exponents.
In earlier posts, we showed how the 2-year and 4-year rolling exponents oscillate around our long-term attractor of 5.65. The 2Y line moves more aggressively while the 4Y line smooths the noise. Both measure whether recent price behavior is accelerating or decelerating relative to the power law’s structural attractor.
We can finally say both curves are slowing down.
As of today, the 2Y rolling exponent sits near 4.06, and it’s just showing early signs of slowing its rate of descent. The 4Y sits near 7.21, nearing a top, with a much less noticeable daily change rate.
These curves are decelerating. The magnitude of their daily change is shrinking before finally transitioning into a new top or a new bottom.
To affirm deceleration, we expect to see 2Y velocity climb. Just as it has since early February. If you look closely, you can see how velocity spikes in either direction create ripples through the 2Y exponent.
Put another way: they appear to be “pulling up” or “pulling down” the underlying curve. Ultimately, velocity is just a representation of price fluctuations. In this case: larger positive price moves mean faster 2Y velocity, flattening the falling 2Y exponent until it bottoms, and the regime shift is completed.
We are not making a price call. We are reading the structure.
In Rolling Exponents Across Time Horizons, we showed how shorter windows (2Y, 4Y) capture regime and cycle effects, while longer windows (6Y, 8Y, 10Y, 12Y) better approximate the underlying growth rate. When both the 2Y and 4Y fall below 5.65, history suggests a regime worth watching.
We’re still far from that window. The 4Y, for example, might be 1 to 2 years away from crossing under. However, we do know how to monitor this.
Right now, the curves are in transition. Both are slowing.
The system breathes.
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