Should we escape the peak? The principle of the tail-end market in the stock market

Author: Dave.𝟎𝐱U

A century ago, Rockefeller heard a shoeshine boy talking about stocks, and thus he avoided the peak and escaped the 1929 Great Depression, creating a well-known myth of escaping the top. As a result, whenever people see the market bustling, they panic. Posts about stocks from Little Red Book sisters have even become a famous counter-indicator, but we have a huge misunderstanding of this story.

The Misconception of "Tail Market" and Blindly Guessing the Top

The so-called "tail market" comes from Livermore's metaphor. Livermore's famous saying is:

"The last eighth of a dollar is the most expensive."

This warns traders not to blindly guess the top. Later, people likened it to three segments of a fish: fish head, fish body, and fish tail. Among them, the profits of the fish tail often come with great danger, advising everyone not to follow blindly.

However, as the market continues to develop, more and more "tail market" has emerged, which refers to the explosive growth at the tail end. The gains in this type of market are often astonishing, far exceeding the low price of "an eighth of a dollar." So, what is the development principle of the tail market? How does the stock market reach its peak? Today, we revisit Rockefeller's fable.

Revisiting Rockefeller's Fable: The Misunderstood "Shoeshine Boy" Story

On the eve of the 1929 U.S. stock market crash, the U.S. was in the so-called Roaring Twenties, with the stock market rising nearly 500% from 1921 to 1929.

John D. Rockefeller (some versions refer to his son John D. Rockefeller Jr.) went to a hotel in New York. While waiting in the lobby, a shoeshine boy was shining his shoes. During the process, the shoeshine boy suddenly began to recommend stocks to him:

• "Mr. Rockefeller, you should buy a certain stock."

• "This stock will definitely go up."

• "I’ve made a lot of money recently."

After returning to the office, he began to sell off a large amount of stock. Months later, in October 1929, the famous Wall Street Crash of 1929 occurred.

Why is this story so famous? It satisfies many elements of communication, such as a rich personal legend, especially the image of a prophet who can foresee the future in trading, which is often very popular. At the same time, the principle of this story seems to align very well with people's psychological intuition: when everyone starts discussing, it means emotions are overheated, indicating a bubble, and the bubble is about to burst.

Core Essence: The Stock Market is Not Crashed by "Chatting," but by "Funds"

If we think about it calmly, how could a stock be crashed by chatting?

The market rewards action, not cognition, and it does not punish cognition, only action. Chatting is a form of cognitive exchange that cannot influence the market. What we really need to look at is the funds.

From the perspective of market structure, this story is actually observing: Market Participation and Marginal Buyer.

• Logic of Bull Market Ending: It is not due to overvaluation or excessive bubbles, but rather the absence of new buyers.

• Marginal Buyer Response: Returning to this round of U.S. stocks, the most important thing is not how much people are discussing or how many want to enter, but rather the real release of buying volume.

When everyone starts paying attention to U.S. stocks, marveling at the gains, and itching to act, this is not the end of the rise; rather, it is a precursor to the final wave. Because those who are on the sidelines, whose attention has been attracted, have not yet truly put their money in. When they can no longer hold back and real funds rush into U.S. stocks, the buying volume release begins.

The new funds from these retail investors will drive the last wave of stock price increases, with the main players cooperating to offload shares, handing over the chips to them. When they have bought everything, no one else will buy in the market. At this point, the buying pressure disappears, and stocks can only fall. This is the story that has unfolded in the market over the past two months.

Market Empirical Evidence in 2026: From Retail Investor Entry to Information Diffusion Path

Starting from the end of April, alarms about short-term corrections began to spread among experienced U.S. stock traders, while discussions about U.S. stocks on Little Red Book and Twitter gradually heated up. However, the entire month of May delivered quite impressive gains, which is because:

• At the end of April, retail investors had not yet put in their money;

• By May, a large number of retail investors had started to deploy funds, even fully committing their positions.

A famous example is from the crypto circle: when Binance launched stock contracts, crypto players eagerly poured their money into stocks. When these individuals, who had been banned from normal investment channels, finally managed to buy in, who else was left to buy? Once everyone has bought, who will be left to buy?

This is actually the information diffusion path of a bull market:

When marginalized groups and lower-tier individuals start to pay attention, it marks the beginning of the end; when they have all put their money in, fantasizing about getting rich, it marks the beginning of the collapse.

Historical Mirrors and Current Assessment of Buying Volume Release Progress

Historically, there have been many similar cases. During the 1999 internet bubble, many taxi drivers began recommending internet stocks. A large number of people who had never engaged in investing opened accounts to trade stocks, and then the Dot-com bubble burst. Inattentive traders might simply attribute the decline to: too many people were talking, the heat was too high, hence the drop. But the truth is everyone had put their money in, and no one was left to take over, so the decline happened.

Returning to the current situation, buying volume release rate is the most important indicator. So what is the current progress of buying volume release? It is hard to say; this is a difficult metric to quantify. Especially after the Chinese government cut off the outflow of domestic funds, it has become increasingly difficult to judge what potential buying volume remains unreleased.

Currently, the observable situation is that the first wave of buying volume has basically been released.

• Let's take the crypto circle as an example. Chuanmu (@xiaomustock) is a professional investor who participated in the early stages of the bull market, and by the time he came to me, it was already the later stages of the bull market.

• In the past two weeks, various U.S. stock groups and themes have started to emerge, clearly belonging to marginalized groups (no offense intended, teachers).

Response Strategies and Market Outlook

However, I do not believe that this will lead to a direct and steep decline, as buying volume release is not an instantaneous process.

1. Short-term Support: Not all types of traders will choose to chase highs; many are holding cash, waiting for the next short-term bottom.

2. Rebound Expectations: This wave of buying volume will support a round of rebound gains after last Friday, but how high the extent and volume will be is currently unknown, so caution is advised.

3. Profit-taking Strategy: Regarding the recent profit-taking exit strategy, I have already mentioned in a post; last Friday can be seen as the first instance of selling. Next, we need to gradually consider profit-taking.

Feel free to follow, share, and comment. The above content is for personal research and information compilation only and does not constitute investment advice. Investing carries risks, and decisions should be made cautiously.