◐ Behavioral
◆ The PatternThe two emotional extremes of market cycles.
Euphoria and Panic — the two emotional extremes that mark market tops and bottoms.
Signs of euphoria:
• "This time is different" — the four most expensive words
• Retail investor participation surges
• IPOs of marginal companies succeed wildly
• Taxi drivers / neighbors give stock tips
Signs of panic:
• "I can't take it anymore" — capitulation
• Margin calls force selling at any price
• VIX spikes to 40+
• "Stocks are dead" headlines
• "This time is different" — the four most expensive words
• Retail investor participation surges
• IPOs of marginal companies succeed wildly
• Taxi drivers / neighbors give stock tips
Signs of panic:
• "I can't take it anymore" — capitulation
• Margin calls force selling at any price
• VIX spikes to 40+
• "Stocks are dead" headlines
Pattern bridge: Extreme sentiment at both ends of the distribution tails. In ML, diffusion models add noise (panic) then learn to reverse it (recovery).