A market regime is a probabilistic label for the current mood of the overall market: risk-on (broad bullish flow), risk-off (broad bearish flow), or transition (uncertain). Framler uses Bayesian Online Changepoint Detection on SPY log-returns to maintain a live posterior over the three regimes, updated daily.
Adams-MacKay 2007 Bayesian Online Changepoint Detection — we maintain a posterior distribution over which regime the market is currently in, updated daily on SPY log-returns. Each factor has different efficacy in each regime (e.g. momentum works great in risk-on, gets crushed in risk-off). The regime modulates how we weight factors and how we amplify the alpha contribution.