Psychological Phases in the Market:
1. Capitulation:
- This phase shows periods of sharp price declines, investors sell their holdings at significant losses, leading to increasing unrealized losses. Examples are 2011-2012, 2014, and 2018.
2. Hope/Fear:
- In this phase, the market begins to recover slowly, with slightly higher prices and lower unrealized losses, creating a balance between hope and fear. Examples are 2012-2013, 2015, and 2019.
3. Optimism/Anxiety:
- This phase is characterized by clear price increases and unrealized profits, but is accompanied by some anxiety about a potential recession. Examples are 2013, 2016, and 2020.
4. Belief/Denial:
- In this phase, prices continue to rise, unrealized profits increase, and reinforce the belief that the upward trend will continue. Examples are 2013-2014, 2017, and 2021.
5. Euphoria/Greed:
- Markets reach very high peaks during this phase, with the highest unrealized profits, reflecting extreme greed among investors. Examples include late 2013, late 2017, and late 2021.