Framework Details

The complete decision logic, special rules, and threshold methodology for Framework v3.1.

Decision Tree

The alert level is determined by walking through these steps in order. The Peak Override check runs in parallel every evaluation cycle.

Are any Structural signals active (Yellow or Red, after persistence)?

NO → Level 0. Stop. · YES → Continue to Step 2.

Are any Escalation Blockers active?

YES → Note blocker. Max escalation is Level 1 unless Peak Override applies. · NO → Continue normally.

Is the Financing signal active (Yellow or Red, sector-linked, after persistence)?

NO → Level 1. Stop — unless Peak Override applies. · YES → Continue to Step 4.

Are any Peak signals active (Yellow or Red, after persistence)?

NO → Level 1–2 depending on structural severity. · YES → Continue to Step 5.

Count active Red signals across all three layers.

All three layers Red → Level 3 · Two layers Red → Level 2 · One layer Red + others Yellow → Level 1–2

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PEAK OVERRIDE (runs in parallel every evaluation)

Are 2+ Peak signals simultaneously Red with persistence met? YES → Escalate one level beyond structural reading. Mark reduced-confidence. · NO → Standard logic applies.

Special Rules

1. Sector-Linkage Veto

Macro stress alone (Federal Reserve tightening, inflation shock) never triggers escalation beyond Level 1 without confirmed sector-linked deterioration. Signal 3 (HY Tech OAS Spreads) has a manual toggle: "Macro-driven" vs "Sector-driven."

When toggled to "Macro-driven," Signal 3 is reclassified as Context information for that evaluation cycle — it carries zero escalation weight. This prevents the system from escalating during broad macro sell-offs that don't reflect AI sector-specific stress.

2. Peak Signal Override

If two or more Peak layer signals (Signals 4, 5, 6) simultaneously reach Red AND have met their persistence requirements, the system escalates one level beyond what the structural reading alone would produce. This override fires even without a Financing signal.

When the Peak Override triggers, a "reduced-confidence" marker is displayed because the escalation is based on market signals without full financing confirmation.

3. Escalation Blockers

If semiconductor leadership (Signal 4) remains positive (Green), or if market breadth stays above 70% (Signal 5 Green), structural escalation is delayed by one level. The rationale: if semiconductors are still leading and breadth is strong, the bubble thesis lacks market confirmation.

Important: Escalation Blockers do NOT prevent Peak Override escalation — they only limit structural-driven escalation.

4. Maximum Escalation Speed

No more than one alert level increase per four-week evaluation cycle. This prevents the system from jumping from Level 0 to Level 3 in a single week based on a sudden data release.

Exception: If all three trigger categories (Structural, Financing, and Peak) fire simultaneously, the speed limit is removed. This accounts for truly rapid cascading deterioration.

5. Macro Circuit Breaker

If SPY falls more than 15% in 3 months AND VIX exceeds 35, a macro stress context flag is displayed. This carries zero escalation weight — it is purely informational.

The circuit breaker helps distinguish between sector-specific stress (which the system is designed to detect) and broad market panic (which requires different analysis).

Signal Thresholds

Signal	Layer	Green	Yellow	Red	Persistence
Capex vs Revenue	Structural	<15pp	15–30pp	>30pp	1 quarter
Private Credit	Structural	0–1 stressed	2 stressed	3–4 stressed	4 weeks
HY Tech OAS	Financing	<50th pctl	50th–75th	>75th pctl	4 weeks
SOXX vs SPY	Peak	≥ -5%	-5% to -10%	< -10%	4 weeks
Market Breadth	Peak	>70%	50–70%	35–50%	3 weeks
Margin Debt	Peak	Rising/flat	Declining 1–2mo	Declining 3+mo	3 months

Version History

Version	Date	Key Changes
v1.0	Jan 2026	Initial price-based system. 3-tier composite tracking.
v2.0	Feb 2026	Tier A/B/C signal revision. Expanded signal categories.
v3.1	Mar 2026	Complete rewrite. Two-horizon architecture. MVP signal lock (6 signals). Persistence requirements. Decision tree. Special rules (sector-linkage veto, peak override, escalation blockers, max speed, circuit breaker). Backtest calibration.