MTS Monthly Review – March 2026

Reporting Period: March 2 – March 31, 2026

1. Monthly Overview

March marked the first regime transition since the launch of the MTS framework.

From a regime perspective, the month began under the Up regime, supported by relatively strong earnings momentum. However, in mid-March, a deterioration in Earnings Strength caused the MTS score to fall below the threshold required to sustain the Up regime.

This triggered the first regime shift from Up to Neutral, leading to the system’s first portfolio rebalance since launch.

• Starting Regime: UP

• Ending Regime: Neutral

• Regime Changes: 1

• Final YTD Return (MTS $): -9.57%

• Final YTD Return (SPY $): -10.73%

• Alpha vs SPY ($): +1.16%

• Maximum Drawdown (MTS $): -9.57%

  
  

Although market conditions deteriorated during the month, the MTS framework outperformed the benchmark while maintaining lower drawdown, reflecting the defensive positioning following the regime transition.

2. Regime Flow for February

Week	Period	Regime
Week 1	Mar 2 – Mar 6	UP
Week 2	Mar 9 – Mar 13	UP
Week 3	Mar 16 – Mar 20	UP
Week 4	Mar 23 – Mar 27	Neutral
Week 5	Mar 30 – Mar 31	Neutral

The regime shift occurred following a sharp deterioration in Earnings Strength, which drove the MTS score below the Up regime threshold.

Despite a recovery in Breadth Strength and Sector Momentum toward the end of the month, the smoothed MTS score remained within the Neutral range.

3. Asset Allocation

In alignment with the predefined regime rules, the portfolio transitioned to the Neutral allocation structure following the regime change.

Under the Neutral regime:

• SPYM: 30%

• TLT: 20%

• SGOV: 50%

  
  

The rebalance was executed immediately after the regime transition, reflecting strict adherence to the rule-based allocation framework.

4. Performance Summary

Weekly Performance Breakdown

Week	MTS Return	SPY Return	Alpha
Week 1	-1.97%	-1.98%	+0.01%
Week 2	-1.67%	-1.50%	-0.17%
Week 3	-1.66%	-2.07%	+0.41%
Week 4	-1.36%	-2.28%	+0.92%

Key Observations

• The regime transition occurred during a broad market decline, providing the first real-world test of the system’s defensive behavior.

• Following the transition, the portfolio maintained lower drawdown relative to the benchmark.

• Market internals improved late in the month, but earnings momentum remained unchanged.

• The smoothing mechanism prevented premature re-entry into the Up regime.

5. System Integrity Check

Throughout March, the system continued to operate strictly within its predefined rules.

• The regime transition was triggered entirely by signal deterioration, without discretionary intervention.

• Portfolio rebalancing was executed immediately following the regime change.

• No deviations from the system rules were introduced during the month.

Overall, the system maintained structural discipline and responded appropriately to changes in market conditions.

6. Risk Notes Recap

From the weekly risk logs, several themes emerged during March:

• Earnings Strength deterioration was the primary driver behind the regime shift.

• Breadth and Sector Momentum recovered later in the month, suggesting partial stabilization of market internals.

• However, earnings momentum remained unchanged, preventing confirmation of a renewed uptrend.

7. Lessons from February

Several insights emerged from the system’s first regime transition.

1. Earnings signals play a decisive role in regime shifts.

   The deterioration in Earnings Strength proved to be the dominant factor driving the regime transition.

2. Market internals may recover before earnings.

   Improvements in breadth and sector momentum alone were insufficient to trigger a regime upgrade.

3. Smoothing mechanisms remain critical.

   The moving average filter successfully prevented the system from reacting prematurely to short-term market rebounds.

8. Outlook for March

Looking ahead, the primary focus will be whether earnings momentum begins to recover and confirms the improvement observed in breadth and sector leadership.

Key monitoring points:

• Changes in Earnings Strength

• Sustainability of Sector Momentum recovery

• Expansion of market breadth

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Until earnings momentum improves, the system is expected to remain in the Neutral regime, maintaining a defensive allocation structure.

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Final Thoughts

March represented the first meaningful regime shift since the launch of the MTS framework, providing the first live validation of the system under changing market conditions.

Although market conditions weakened during the month, the system demonstrated its ability to respond systematically to signal deterioration while maintaining structural discipline.

As always, the guiding principle of the framework remains unchanged:

Structure Over Impulse.