Most market cycles begin with a trend that few people notice. Once some investors start to recognize it, that recognition itself strengthens the trend. Early on, price movement and investor belief reinforce each other: rising prices increase confidence, and growing confidence pushes prices higher.

At this stage, the market is still relatively stable and close to equilibrium. But as time goes on, the dynamic changes. Prices become less driven by fundamentals and more by expectations, while those expectations grow increasingly exaggerated. The trend and the prevailing bias become tightly linked.

Throughout this phase, the market is repeatedly tested by bad news, macro shocks, or unexpected events. If prices recover each time, investors become even more convinced that the trend is “real” and unbreakable. This is the acceleration phase, when momentum builds rapidly and participation expands.

Eventually, the gap between market belief and underlying reality becomes too large to ignore. Investors begin to realize that optimism has turned into bias. This moment can be called the moment of truth.

The trend may continue for a while due to inertia, but it is no longer supported by growing belief. Momentum fades, prices flatten, and the market enters a twilight or stagnation phase.

Finally, once confidence erodes enough, a trend that depended on ever-increasing belief can no longer sustain itself. The market reaches a crossover point, where the trend reverses. A new bias forms in the opposite direction — fear replaces confidence — triggering a rapid, self-reinforcing decline that often ends in a crash.