Ha, ha......I love it! Our's do the same thing when deer come onto our property to eat under the apple trees. They do a kind of dance with their feet as if they were already running after them! LOL Of course, we never allow our dogs to run deer so I do have to step in to distract them from their obsession.
Our minipoo is also squirrel and deer fixated. His morning ritual is to return to wherever he last saw a deer and hunker down for a stakeout. We live in a rural, wooded area so he has lots of opportunities sit and wait, and wait, and wait. He's confounded by the squirrels when they dash behind a tree and go up the backside of it. He must think they've been abducted by aliens or have the power to disappear. He sits quietly and watches the deer feed in the woods, but he tries to launch on the squirrels, though he's on-leash and doesn't stand a chance. Who needs TV when you have a poodle's antics to watch?!?
Squirrels are Hannah's archenemies! She has yet to catch one, but not for lack of trying. They skitter up the tree and scold her and she'll sit right underneath for HOURS during the summer! We have tons of huge trees and the squirrels can travel blocks without setting foot (paw?) on the ground. She'll never catch one!