Bubble Risk

Explanation

The Short Term Bubble Risk (STBR) measures an asset's price relative to its 20-week simple moving average (20W SMA). It is calculated as:

STBR = Price / 20W SMA

The 20W SMA is typically a weekly value, but here, the latest weekly average is used to provide daily data points for the chart.

As assets grow in market capitalization, pushing the price far above the 20W SMA becomes harder, reducing peak STBR values over time. This metric can signal:

Overheated rallies: STBR > 2
Extreme capitulations: STBR < 0.75

Note: Extreme STBR values don't always mark cycle tops or bottoms but indicate when price momentum is likely to shift due to overstretched conditions.

Data Source:

Alpha Vantage