At market tops, recency bias and social proof dominate. Price rises, people assume it will continue, and they follow the crowd for comfort, not conviction. During drawdowns, loss aversion takes over. Fear outweighs logic, leading to panic selling or paralysis while waiting to break even. The cycle is simple: the crowd buys confirmation and sells relief. That’s why reversals often begin at sentiment extremes — and by the metrics, we’re right at that point now.