US Market Bubble Detection Skill (Revised v2.1)

Key Revisions in v2.1

Critical Changes from v2.0:

1. 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)

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1.2 Leverage & Positioning Data

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1.3 IPO & New Issuance Data

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⚠️ 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)

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Indicator 2: Volatility Suppression + New Highs

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Indicator 3: Leverage (Margin Debt Balance)

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Indicator 4: IPO Market Overheating

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Indicator 5: Breadth Anomaly (Narrow Leadership)

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

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

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Adjustment C: Valuation Disconnect (0-1 points, AVOID DOUBLE-COUNTING)

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Phase 3 Total: Maximum +3 points

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Phase 4: Final Judgment (REVISED v2.1)

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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

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Data Sources (Required)

US Market

• - Put/Call: https://www.cboe.com/tradable_products/vix/
• VIX: Yahoo Finance (^VIX) or https://www.cboe.com/
• Margin Debt: https://www.finra.org/investors/learn-to-invest/advanced-investing/margin-statistics
• Breadth: https://www.barchart.com/stocks/indices/sp/sp500?viewName=advanced
• IPO: https://www.renaissancecapital.com/IPO-Center/Stats

Japanese Market

• - Nikkei Futures P/C: https://www.barchart.com/futures/quotes/NO*0/options
• JNIVE: https://www.investing.com/indices/nikkei-volatility-historical-data
• Margin Debt: JSF (Japan Securities Finance) Monthly Report
• Breadth: https://en.macromicro.me/series/31841/japan-topix-index-200ma-breadth
• IPO: https://www.pwc.co.uk/services/audit/insights/global-ipo-watch.html

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Implementation Checklist

Verify the following when using:

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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.

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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:

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Output Format

Evaluation Report Structure (v2.1)

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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 INLINECODE5
• Need theoretical background: Load INLINECODE6
• Need historical context: Load INLINECODE7
• 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. 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.