US Market Bubble Detection Skill (Revised v2.1)
Key Revisions in v2.1
Critical Changes from v2.0:
- ✅ Mandatory Quantitative Data Collection - Use measured values, not impressions or speculation
- ✅ Clear Threshold Settings - Specific numerical criteria for each indicator
- ✅ Two-Phase Evaluation Process - Quantitative evaluation → Qualitative adjustment (strict order)
- ✅ Stricter Qualitative Criteria - Max +3 points (reduced from +5), requires measurable evidence
- ✅ Confirmation Bias Prevention - Explicit checklist to avoid over-scoring
- ✅ Granular Risk Phases - Added "Elevated Risk" phase (8-9 points) for nuanced risk management
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
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
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 < 0.70 (excessive optimism, call-heavy)
- 1 point: P/C 0.70-0.85 (slightly optimistic)
- 0 points: P/C > 0.85 (healthy caution)
Rationale: P/C < 0.7 is historically characteristic of bubble periods
Indicator 2: Volatility Suppression + New Highs
Scoring Criteria:
- 2 points: VIX < 12 AND major index within 5% of 52-week high
- 1 point: VIX 12-15 AND near highs
- 0 points: VIX > 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 < 45% of stocks above 50DMA (narrow leadership)
- 1 point: 45-60% above 50DMA (somewhat narrow)
- 0 points: > 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
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 <5x OR no mainstream coverage
⚠️ CRITICAL: "Elevated narrative" without data = +0 points
HOW TO VERIFY:
1. Search "[topic] Google Trends 2025" and document numbers
2. Search "[topic] Time magazine cover" for specific dates
3. Search "[topic] CNBC special" for episode confirmation
✅ VALID EXAMPLE:
"Google Trends: 'AI stocks' at 780 (baseline 150 = 5.2x).
Time cover 'AI Revolution' (Oct 15, 2025).
CNBC 'AI Investment Special' (3 episodes Oct 2025)."
⚠️ INVALID EXAMPLE:
"AI/technology narrative seems elevated" (unmeasurable)
Adjustment C: Valuation Disconnect (0-1 points, AVOID DOUBLE-COUNTING)
+1 point: ALL criteria must be met:
✓ P/E >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 <25 OR fundamentals support valuations
⚠️ SELF-CHECK QUESTIONS (if ANY is YES, score = 0):
- Is P/E already in Phase 2 quantitative scoring?
- Do companies have real earnings supporting valuations?
- Is the narrative backed by fundamental improvements?
✅ VALID EXAMPLE for +1:
"S&P P/E = 35x (vs historical 18x).
CNBC article: 'Earnings don't matter in AI era' (Oct 2025).
Bloomberg: 'Traditional metrics obsolete' (Nov 2025)."
⚠️ INVALID EXAMPLE:
"P/E 30.8 but companies have real earnings and AI has fundamental backing"
(fundamentals support = +0 points)
Phase 3 Total: Maximum +3 points
Phase 4: Final Judgment (REVISED v2.1)
Final Score = Phase 2 Total (0-12 points) + Phase 3 Adjustment (0 to +3 points)
Range: 0 to 15 points
Judgment Criteria (with Risk Budget):
- 0-4 points: Normal (Risk Budget: 100%)
- 5-7 points: Caution (Risk Budget: 70-80%)
- 8-9 points: Elevated Risk (Risk Budget: 50-70%) ⚠️ NEW in v2.1
- 10-12 points: Euphoria (Risk Budget: 40-50%)
- 13-15 points: Critical (Risk Budget: 20-30%)
Key Change in v2.1:
- Added "Elevated Risk" phase (8-9 points) for more nuanced positioning
- 9 points is no longer extreme defensive zone (was 40% risk budget)
- Now allows 50-70% risk budget at 8-9 point level
- More gradual transition from Caution to Euphoria phases
Data Sources (Required)
US Market
Japanese Market
Implementation Checklist
Verify the following when using:
□ Have you collected all Phase 1 data?
□ Did you apply each indicator's threshold mechanically?
□ Did you keep qualitative evaluation within +5 point limit?
□ Are you NOT assigning points based on news article impressions?
□ Does your final score align with other quantitative frameworks?
Important Principles (Revised)
1. Data > 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.
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
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
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
Output Format
Evaluation Report Structure (v2.1)
# [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)
|-----------|----------------|-------|-----------|
| Put/Call | [value] | [0-2] | [reason] |
| VIX + Highs | [value] | [0-2] |
