diff --git a/cc_config.py b/cc_config.py
index f377e0b..355d310 100644
--- a/cc_config.py
+++ b/cc_config.py
@@ -20,6 +20,7 @@
     "verbose":          False,
     "thinking":         False,
     "thinking_budget":  10000,
+    "thinking_mode":    "loud",    # "loud" = think-out-loud with <thinking> tags
     "custom_base_url":  "",       # for "custom" provider
     "max_tool_output":  32000,
     "max_agent_depth":  3,
diff --git a/context.py b/context.py
index 6f838a6..43228af 100644
--- a/context.py
+++ b/context.py
@@ -7,6 +7,18 @@
 
 from memory import get_memory_context
 
+_THINK_OUT_LOUD_PROMPT = """
+# Think-Out-Loud Mode
+
+Wrap your internal reasoning in `<""" + """thinking>...</""" + """thinking>` XML tags.
+These are displayed to the user in italic but stripped from your context in future turns.
+
+Use thinking for: planning, analyzing code, debugging, weighing options.
+Keep it focused -- commit to an approach, avoid loops.
+You can interleave thinking blocks with visible text freely.
+Do NOT wrap simple responses in thinking.
+"""
+
 # ── Prompt injection detection ───────────────────────────────────────────
 _THREAT_PATTERNS = [
     re.compile(r'ignore\s+(previous|all|above|prior)(\s+\w+)*\s+(instructions?|prompts?|rules?)', re.I),
diff --git a/tests/test_thinking_parser.py b/tests/test_thinking_parser.py
new file mode 100644
index 0000000..9759441
--- /dev/null
+++ b/tests/test_thinking_parser.py
@@ -0,0 +1,148 @@
+"""Tests for thinking_parser module."""
+import sys, os
+sys.path.insert(0, os.path.join(os.path.dirname(__file__), ".."))
+
+from thinking_parser import ThinkingStreamParser, LoopDetector, strip_thinking_tags, OPEN_TAG, CLOSE_TAG
+
+# Build test strings using the tag constants to avoid XML transport issues
+def _wrap(inner):
+    return OPEN_TAG + inner + CLOSE_TAG
+
+
+class TestThinkingStreamParser:
+    def test_no_thinking_tags(self):
+        p = ThinkingStreamParser()
+        events = p.feed("Hello world")
+        events += p.finalize()
+        texts = "".join(t for k, t in events if k == "text")
+        assert texts == "Hello world"
+        assert not any(k == "thinking" for k, _ in events)
+
+    def test_basic_thinking_block(self):
+        p = ThinkingStreamParser()
+        events = p.feed(_wrap("reasoning") + "answer")
+        events += p.finalize()
+        thinking = "".join(t for k, t in events if k == "thinking")
+        text = "".join(t for k, t in events if k == "text")
+        assert thinking == "reasoning"
+        assert text == "answer"
+
+    def test_multiple_blocks(self):
+        p = ThinkingStreamParser()
+        events = p.feed(_wrap("A") + "X" + _wrap("B") + "Y")
+        events += p.finalize()
+        thinking = "".join(t for k, t in events if k == "thinking")
+        text = "".join(t for k, t in events if k == "text")
+        assert thinking == "AB"
+        assert text == "XY"
+
+    def test_partial_open_tag_across_chunks(self):
+        p = ThinkingStreamParser()
+        all_events = []
+        # Split the open tag across two chunks
+        all_events += p.feed("before" + OPEN_TAG[:4])
+        all_events += p.feed(OPEN_TAG[4:] + "inside" + CLOSE_TAG + "after")
+        all_events += p.finalize()
+        thinking = "".join(t for k, t in all_events if k == "thinking")
+        text = "".join(t for k, t in all_events if k == "text")
+        assert thinking == "inside"
+        assert text == "beforeafter"
+
+    def test_partial_close_tag_across_chunks(self):
+        p = ThinkingStreamParser()
+        all_events = []
+        all_events += p.feed(OPEN_TAG + "inside" + CLOSE_TAG[:6])
+        all_events += p.feed(CLOSE_TAG[6:] + "outside")
+        all_events += p.finalize()
+        thinking = "".join(t for k, t in all_events if k == "thinking")
+        text = "".join(t for k, t in all_events if k == "text")
+        assert thinking == "inside"
+        assert text == "outside"
+
+    def test_unclosed_tag_flushed_on_finalize(self):
+        p = ThinkingStreamParser()
+        events = p.feed(OPEN_TAG + "unclosed")
+        events += p.finalize()
+        thinking = "".join(t for k, t in events if k == "thinking")
+        assert thinking == "unclosed"
+
+    def test_text_before_thinking(self):
+        p = ThinkingStreamParser()
+        events = p.feed("before" + _wrap("during") + "after")
+        events += p.finalize()
+        assert events == [
+            ("text", "before"),
+            ("thinking", "during"),
+            ("text", "after"),
+        ]
+
+    def test_empty_thinking_block(self):
+        p = ThinkingStreamParser()
+        events = p.feed(_wrap("") + "text")
+        events += p.finalize()
+        text = "".join(t for k, t in events if k == "text")
+        assert text == "text"
+
+    def test_character_by_character(self):
+        p = ThinkingStreamParser()
+        full = _wrap("abc") + "xyz"
+        events = []
+        for ch in full:
+            events += p.feed(ch)
+        events += p.finalize()
+        thinking = "".join(t for k, t in events if k == "thinking")
+        text = "".join(t for k, t in events if k == "text")
+        assert thinking == "abc"
+        assert text == "xyz"
+
+    def test_newlines_preserved(self):
+        p = ThinkingStreamParser()
+        events = p.feed(_wrap("line1\nline2\n"))
+        events += p.finalize()
+        thinking = "".join(t for k, t in events if k == "thinking")
+        assert thinking == "line1\nline2\n"
+
+    def test_full_thinking_text_property(self):
+        p = ThinkingStreamParser()
+        p.feed(_wrap("part1") + "gap" + _wrap("part2"))
+        assert p.full_thinking_text == "part1part2"
+
+
+class TestLoopDetector:
+    def test_no_repetition(self):
+        d = LoopDetector()
+        assert not d.feed("Normal text without any repeating patterns at all here.")
+
+    def test_short_text(self):
+        d = LoopDetector()
+        assert not d.feed("abc" * 10)
+
+    def test_long_repeating_pattern(self):
+        d = LoopDetector()
+        pattern = "I need to analyze this carefully now. ok " * 10
+        assert d.feed(pattern)
+
+    def test_incremental_detection(self):
+        d = LoopDetector()
+        pattern = "I keep repeating this same thought!! "
+        for _ in range(6):
+            assert not d.feed(pattern)
+        for _ in range(6):
+            if d.feed(pattern):
+                return
+        assert False, "Should have detected loop"
+
+
+class TestStripThinkingTags:
+    def test_basic(self):
+        assert strip_thinking_tags(_wrap("r") + "answer") == "answer"
+
+    def test_multiline(self):
+        result = strip_thinking_tags(_wrap("line1\nline2\n") + "answer")
+        assert result == "answer"
+
+    def test_multiple_blocks(self):
+        assert strip_thinking_tags(_wrap("a") + "X" + _wrap("b") + "Y") == "XY"
+
+    def test_no_tags(self):
+        assert strip_thinking_tags("just text") == "just text"
diff --git a/thinking_parser.py b/thinking_parser.py
new file mode 100644
index 0000000..6e1e32c
--- /dev/null
+++ b/thinking_parser.py
@@ -0,0 +1,119 @@
+"""Incremental parser for thinking XML tags in text stream, with loop detection."""
+
+import re
+
+OPEN_TAG = "<" + "thinking>"
+CLOSE_TAG = "</" + "thinking>"
+_THINKING_RE = re.compile(r"<" + r"thinking>.*?</" + r"thinking>", re.DOTALL)
+
+
+class ThinkingStreamParser:
+    """Parses a stream of text chunks, separating thinking blocks from regular text."""
+
+    def __init__(self):
+        self._buffer = ""
+        self._in_thinking = False
+        self._thinking_text: list[str] = []
+
+    def feed(self, chunk: str) -> list[tuple[str, str]]:
+        """Feed a chunk. Returns list of ("text", content) or ("thinking", content) tuples."""
+        self._buffer += chunk
+        results: list[tuple[str, str]] = []
+
+        while self._buffer:
+            if self._in_thinking:
+                end_idx = self._buffer.find(CLOSE_TAG)
+                if end_idx != -1:
+                    thinking_content = self._buffer[:end_idx]
+                    if thinking_content:
+                        results.append(("thinking", thinking_content))
+                        self._thinking_text.append(thinking_content)
+                    self._buffer = self._buffer[end_idx + len(CLOSE_TAG):]
+                    self._in_thinking = False
+                else:
+                    for i in range(1, min(len(CLOSE_TAG), len(self._buffer) + 1)):
+                        if CLOSE_TAG[:i] == self._buffer[-i:]:
+                            emit = self._buffer[:-i]
+                            if emit:
+                                results.append(("thinking", emit))
+                                self._thinking_text.append(emit)
+                            self._buffer = self._buffer[-i:]
+                            return results
+                    results.append(("thinking", self._buffer))
+                    self._thinking_text.append(self._buffer)
+                    self._buffer = ""
+            else:
+                start_idx = self._buffer.find(OPEN_TAG)
+                if start_idx != -1:
+                    text_before = self._buffer[:start_idx]
+                    if text_before:
+                        results.append(("text", text_before))
+                    self._buffer = self._buffer[start_idx + len(OPEN_TAG):]
+                    self._in_thinking = True
+                else:
+                    for i in range(1, min(len(OPEN_TAG), len(self._buffer) + 1)):
+                        if OPEN_TAG[:i] == self._buffer[-i:]:
+                            emit = self._buffer[:-i]
+                            if emit:
+                                results.append(("text", emit))
+                            self._buffer = self._buffer[-i:]
+                            return results
+                    results.append(("text", self._buffer))
+                    self._buffer = ""
+
+        return results
+
+    def finalize(self) -> list[tuple[str, str]]:
+        """Flush remaining buffer."""
+        results: list[tuple[str, str]] = []
+        if self._buffer:
+            kind = "thinking" if self._in_thinking else "text"
+            results.append((kind, self._buffer))
+            if self._in_thinking:
+                self._thinking_text.append(self._buffer)
+            self._buffer = ""
+        return results
+
+    @property
+    def full_thinking_text(self) -> str:
+        return "".join(self._thinking_text)
+
+    @property
+    def in_thinking(self) -> bool:
+        return self._in_thinking
+
+
+class LoopDetector:
+    """Detects repetitive patterns in a stream of text."""
+
+    WINDOW_SIZE = 2000
+    PATTERN_LENGTHS = list(range(20, 51)) + list(range(55, 201, 5))
+    MIN_REPEATS = 8
+
+    def __init__(self):
+        self._window = ""
+
+    def feed(self, text: str) -> bool:
+        """Feed text. Returns True if a loop is detected."""
+        self._window += text
+        if len(self._window) > self.WINDOW_SIZE:
+            self._window = self._window[-self.WINDOW_SIZE:]
+        if len(self._window) < 200:
+            return False
+        return any(self._check_pattern(plen) for plen in self.PATTERN_LENGTHS)
+
+    def _check_pattern(self, pattern_length: int) -> bool:
+        needed = pattern_length * self.MIN_REPEATS
+        if len(self._window) < needed:
+            return False
+        tail = self._window[-needed:]
+        pattern = tail[:pattern_length]
+        return all(
+            tail[i : i + pattern_length] == pattern
+            for i in range(pattern_length, needed, pattern_length)
+        )
+
+
+def strip_thinking_tags(content: str) -> str:
+    """Remove all thinking blocks from content."""
+    return _THINKING_RE.sub("", content).strip()