Us Market Bubble Detector

US Market Bubble Detection Skill (Revised v2.1)

Key Revisions in v2.1

Critical Changes from v2.0:

1. ✅ Mandatory Quantitative Data Collection - Use measured values, not impressions or speculation
2. ✅ Clear Threshold Settings - Specific numerical criteria for each indicator
3. ✅ Two-Phase Evaluation Process - Quantitative evaluation → Qualitative adjustment (strict order)
4. ✅ Stricter Qualitative Criteria - Max +3 points (reduced from +5), requires measurable evidence
5. ✅ Confirmation Bias Prevention - Explicit checklist to avoid over-scoring
6. ✅ Granular Risk Phases - Added "Elevated Risk" phase (8-9 points) for nuanced risk management

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When to Use This Skill

Use this skill when:

English:

• User asks "Is the market in a bubble?" or "Are we in a bubble?"
• User seeks advice on profit-taking, new entry timing, or short-selling decisions
• User reports social phenomena (non-investors entering, media frenzy, IPO flood)
• User mentions narratives like "this time is different" or "revolutionary technology" becoming mainstream
• User consults about risk management for existing positions

Japanese:

• ユーザーが「今の相場はバブルか?」と尋ねる
• 投資の利確・新規参入・空売りのタイミング判断を求める
• 社会現象(非投資家の参入、メディア過熱、IPO氾濫)を観察し懸念を表明
• 「今回は違う」「革命的技術」などの物語が主流化している状況を報告
• 保有ポジションのリスク管理方法を相談

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Evaluation Process (Strict Order)

Phase 1: Mandatory Quantitative Data Collection

CRITICAL: Always collect the following data before starting evaluation

1.1 Market Structure Data (Highest Priority)

□ Put/Call Ratio (CBOE Equity P/C)
  - Source: CBOE DataShop or web_search "CBOE put call ratio"
  - Collect: 5-day moving average

□ VIX (Fear Index)
  - Source: Yahoo Finance ^VIX or web_search "VIX current"
  - Collect: Current value + percentile over past 3 months

□ Volatility Indicators
  - 21-day realized volatility
  - Historical position of VIX (determine if in bottom 10th percentile)

1.2 Leverage & Positioning Data

□ FINRA Margin Debt Balance
  - Source: web_search "FINRA margin debt latest"
  - Collect: Latest month + Year-over-Year % change

□ Breadth (Market Participation)
  - % of S&P 500 stocks above 50-day MA
  - Source: web_search "S&P 500 breadth 50 day moving average"

1.3 IPO & New Issuance Data

□ IPO Count & First-Day Performance
  - Source: Renaissance Capital IPO or web_search "IPO market 2025"
  - Collect: Quarterly count + median first-day return

⚠️ CRITICAL: Do NOT proceed with evaluation without Phase 1 data collection

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Phase 2: Quantitative Evaluation (Quantitative Scoring)

Score mechanically based on collected data using the following criteria:

Indicator 1: Put/Call Ratio (Market Sentiment)

Scoring Criteria:
- 2 points: P/C  0.85 (healthy caution)

Rationale: P/C  15 OR more than 10% from highs

Rationale: Extreme low volatility + highs indicates excessive complacency

Indicator 3: Leverage (Margin Debt Balance)

Scoring Criteria:
- 2 points: YoY +20% or more AND all-time high
- 1 point: YoY +10-20%
- 0 points: YoY +10% or less OR negative

Rationale: Rapid leverage increase is a bubble precursor

Indicator 4: IPO Market Overheating

Scoring Criteria:
- 2 points: Quarterly IPO count > 2x 5-year average AND median first-day return +20%+
- 1 point: Quarterly IPO count > 1.5x 5-year average
- 0 points: Normal levels

Rationale: Poor-quality IPO flood is characteristic of late-stage bubbles

Indicator 5: Breadth Anomaly (Narrow Leadership)

Scoring Criteria:
- 2 points: New high AND  60% above 50DMA (healthy breadth)

Rationale: Rally driven by few stocks is fragile

Indicator 6: Price Acceleration

Scoring Criteria:
- 2 points: Past 3-month return exceeds 95th percentile of past 10 years
- 1 point: Past 3-month return in 85-95th percentile of past 10 years
- 0 points: Below 85th percentile

Rationale: Rapid price acceleration is unsustainable

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Phase 3: Qualitative Adjustment (REVISED v2.1)

Limit: +3 points maximum (REDUCED from +5 in v2.0)

⚠️ CONFIRMATION BIAS PREVENTION CHECKLIST:

Before adding ANY qualitative points:
□ Do I have concrete, measurable data? (not impressions)
□ Would an independent observer reach the same conclusion?
□ Am I avoiding double-counting with Phase 2 scores?
□ Have I documented specific evidence with sources?

Adjustment A: Social Penetration (0-1 points, STRICT CRITERIA)

+1 point: ALL THREE criteria must be met:
  ✓ Direct user report of non-investor recommendations
  ✓ Specific examples with names/dates/conversations
  ✓ Multiple independent sources (minimum 3)

+0 points: Any criteria missing

⚠️ INVALID EXAMPLES:
- "AI narrative is prevalent" (unmeasurable)
- "I saw articles about retail investors" (not direct report)
- "Everyone is talking about stocks" (vague, unverified)

✅ VALID EXAMPLE:
"My barber asked about NVDA (Nov 1), dentist mentioned AI stocks (Nov 2),
Uber driver discussed crypto (Nov 3)"

Adjustment B: Media/Search Trends (0-1 points, REQUIRES MEASUREMENT)

+1 point: BOTH criteria must be met:
  ✓ Google Trends showing 5x+ YoY increase (measured)
  ✓ Mainstream coverage confirmed (Time covers, TV specials with dates)

+0 points: Search trends 25 (if NOT already counted in Phase 2 quantitative)
  ✓ Fundamentals explicitly ignored in mainstream discourse
  ✓ "This time is different" documented in major media

+0 points: P/E  Impressions
Ignore "many news reports" or "experts are cautious" without quantitative data.

### 2. Strict Order: Quantitative → Qualitative
Always evaluate in this order: Phase 1 (Data Collection) → Phase 2 (Quantitative) → Phase 3 (Qualitative Adjustment).

### 3. Upper Limit on Subjective Indicators
Qualitative adjustment has a total limit of +5 points. It cannot override quantitative evaluation.

### 4. "Taxi Driver" is Symbolic
Do not readily acknowledge mass penetration without direct recommendations from non-investors.

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## Common Failures and Solutions (Revised)

### Failure 1: Evaluating Based on News Articles
❌ "Many reports on Takaichi Trade" → Media saturation 2 points
✅ Verify Google Trends numbers → Evaluate with measured values

### Failure 2: Overreaction to Expert Comments
❌ "Warning of overheating" → Euphoria zone
✅ Judge with measured values of Put/Call, VIX, margin debt

### Failure 3: Emotional Reaction to Price Rise
❌ 4.5% rise in 1 day → Price acceleration 2 points
✅ Verify position in 10-year distribution → Objective evaluation

### Failure 4: Judgment Based on Valuation Alone
❌ P/E 17 → Valuation disconnect 2 points
✅ P/E + narrative dependence + other quantitative indicators for comprehensive judgment

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## Recommended Actions by Bubble Stage (REVISED v2.1)

### Normal (0-4 points)
**Risk Budget: 100%**
- Continue normal investment strategy
- Set ATR 2.0× trailing stop
- Apply stair-step profit-taking rule (+20% take 25%)

**Short-Selling: Not Allowed**
- Composite conditions not met (0/7 items)

### Caution (5-7 points)
**Risk Budget: 70-80%**
- Begin partial profit-taking (20-30% reduction)
- Tighten ATR to 1.8×
- Reduce new position sizing by 50%

**Short-Selling: Not Recommended**
- Wait for clearer reversal signals

### Elevated Risk (8-9 points) ⚠️ NEW in v2.1
**Risk Budget: 50-70%**
- Increase profit-taking (30-50% reduction)
- Tighten ATR to 1.6×
- New positions: highly selective, quality only
- Begin building cash reserves for future opportunities

**Short-Selling: Consider Cautiously**
- Only after confirming at least 2/7 composite conditions
- Small exploratory positions (10-15% of normal size)
- Strict stop-loss (ATR 2.0×)

**Rationale for NEW phase:**
This zone represents heightened caution without extreme defensiveness.
Market shows warning signs but not imminent collapse.
Maintain exposure to quality positions while building flexibility.

### Euphoria (10-12 points)
**Risk Budget: 40-50%**
- Accelerate stair-step profit-taking (50-60% reduction)
- Tighten ATR to 1.5×
- No new long positions except on major pullbacks

**Short-Selling: Active Consideration**
- After confirming at least 3/7 composite conditions
- Small positions (20-25% of normal size)
- Defined risk only (options, tight stops)

### Critical (13-15 points)
**Risk Budget: 20-30%**
- Major profit-taking or full hedge implementation
- ATR 1.2× or fixed stop-loss
- Cash preservation mode - prepare for major dislocation

**Short-Selling: Recommended**
- After confirming at least 5/7 composite conditions
- Scale in with small positions, pyramid on confirmation
- Tight stop-loss (ATR 1.5× or higher)
- Consider put options for defined risk

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## Composite Conditions for Short-Selling (7 Items)

Only consider shorts after confirming at least 3 of the following:

1. Weekly chart shows lower highs
2. Volume peaks out
3. Leverage indicators drop sharply (margin debt decline)
4. Media/search trends peak out
5. Weak stocks start to break down first
6. VIX surges (spike above 20)
7. Fed/policy shift signals

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## Output Format

### Evaluation Report Structure (v2.1)

```markdown
# [Market Name] Bubble Evaluation Report (Revised v2.1)

## Overall Assessment
- Final Score: X/15 points (v2.1: max reduced from 16)
- Phase: [Normal/Caution/Elevated Risk/Euphoria/Critical]
- Risk Level: [Low/Medium/Medium-High/High/Extremely High]
- Evaluation Date: YYYY-MM-DD

## Quantitative Evaluation (Phase 2)

| Indicator | Measured Value | Score | Rationale |
|-----------|----------------|-------|-----------|
| Put/Call | [value] | [0-2] | [reason] |
| VIX + Highs | [value] | [0-2] | [reason] |
| Margin YoY | [value] | [0-2] | [reason] |
| IPO Heat | [value] | [0-2] | [reason] |
| Breadth | [value] | [0-2] | [reason] |
| Price Accel | [value] | [0-2] | [reason] |

**Phase 2 Total: X/12 points**

## Qualitative Adjustment (Phase 3) - STRICT CRITERIA

**⚠️ Confirmation Bias Check:**
- [ ] All qualitative points have measurable evidence
- [ ] No double-counting with Phase 2
- [ ] Independent observer would agree

### A. Social Penetration (0-1 points)
- Evidence: [REQUIRED: Direct user reports with dates/names]
- Score: [+0 or +1]
- Justification: [Must meet ALL three criteria]

### B. Media/Search Trends (0-1 points)
- Google Trends Data: [REQUIRED: Measured numbers, YoY multiplier]
- Mainstream Coverage: [REQUIRED: Specific Time covers, TV specials with dates]
- Score: [+0 or +1]
- Justification: [Must have 5x+ search AND mainstream confirmation]

### C. Valuation Disconnect (0-1 points)
- P/E Ratio: [Current value]
- Fundamental Backing: [Yes/No - if Yes, score = 0]
- Narrative Analysis: [REQUIRED: Specific media quotes ignoring fundamentals]
- Score: [+0 or +1]
- Justification: [Must show fundamentals actively ignored]

**Phase 3 Total: +X/3 points (max reduced from +5 in v2.0)**

## Recommended Actions

**Risk Budget: X%** (Phase: [Normal/Caution/Elevated Risk/Euphoria/Critical])
- [Specific action 1]
- [Specific action 2]
- [Specific action 3]

**Short-Selling: [Not Allowed/Consider Cautiously/Active/Recommended]**
- Composite conditions: X/7 met
- Minimum required: [0/2/3/5] for current phase

## Key Changes in v2.1
- Stricter qualitative criteria (max +3, down from +5)
- Added "Elevated Risk" phase for 8-9 points
- Confirmation bias prevention checklist
- All qualitative points require measurable evidence

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Reference Documents

references/implementation_guide.md (English) - RECOMMENDED FOR FIRST USE

• Step-by-step evaluation process with mandatory data collection
• NG examples vs OK examples
• Self-check quality criteria (4 levels)
• Red flags during review
• Best practices for objective evaluation

references/bubble_framework.md (Japanese)

• Detailed theoretical framework
• Explanation of Minsky/Kindleberger model
• Behavioral psychology elements

references/historical_cases.md (Japanese)

• Analysis of past bubble cases
• Dotcom, Crypto, Pandemic bubbles
• Common pattern extraction

references/quick_reference.md (Japanese)

references/quick_reference_en.md (English)

• Daily checklist
• Emergency 3-question assessment
• Quick scoring guide
• Key data sources

When to Load References

• First use or need detailed guidance: Load implementation_guide.md
• Need theoretical background: Load bubble_framework.md
• Need historical context: Load historical_cases.md
• Daily operations: Load quick_reference.md (Japanese) or quick_reference_en.md (English)

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Summary: Essence of v2.1 Revision

v2.0 Problem (Identified Nov 2025):

• Qualitative adjustment too loose (+5 max)
• "AI narrative elevated" → +1 point (no data)
• "P/E 30.8" → +1 point (double-counting with quantitative)
• Result: 11/16 points - overly bearish without evidence

v2.1 Solution:

• Qualitative adjustment stricter (+3 max)
• "AI narrative elevated" → 0 points (unmeasured)
• "P/E 30.8 but AI has fundamental backing" → 0 points (fundamentals support)
• Result: 9/15 points - balanced, data-driven assessment

Key Improvements:

1. Confirmation Bias Prevention: Explicit checklist before adding qualitative points
2. Measurable Evidence Required: No points without concrete data (Google Trends, media coverage)
3. Double-Counting Prevention: Valuation must not duplicate Phase 2 quantitative
4. Granular Risk Phases: Added "Elevated Risk" (8-9 points) for nuanced positioning
5. Balanced Risk Budgets: 9 points = 50-70% (not 40% extreme defensive)

Core Principle: > "In God we trust; all others must bring data." - W. Edwards Deming

2025 Lesson: Even data-driven frameworks can be undermined by subjective qualitative adjustments. v2.1 requires MEASURABLE evidence for ALL qualitative points. Independent observers must be able to verify each adjustment.

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Version History:

• v2.0 (Oct 27, 2025): Mandatory quantitative data collection
• v2.1 (Nov 3, 2025): Stricter qualitative criteria, confirmation bias prevention, granular risk phases

Reason for v2.1 Revision: Prevent over-scoring through unmeasured "narrative" assessments and double-counting. Ensure all bubble risk evaluations are independently verifiable and free from confirmation bias.

Source & license

This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.

• Author: tradermonty
• Source: tradermonty/claude-trading-skills
• License: MIT
• Homepage: https://tradermonty.github.io/claude-trading-skills/

Install and usage instructions live in the source repository linked above.