Why Markets Peak When Everyone’s Optimistic
Why the Greatest Risk Comes When Investors Feel Safest
There’s an old saying in trading: When everyone is bullish, who’s left to buy?
It’s a simple concept, but it explains why market tops feel safe — right before everything unravels.
Most investors assume that stocks go up because of good fundamentals. But in reality, stocks rise for one reason only: there are more buyers than sellers. (This is actually tied to liquidity, not fundamentals — but we’ve covered that before.) And once the pool of potential buyers is exhausted, prices have nowhere to go but down.
Let’s break it down with a simple thought experiment.
The "No More Buyers" Problem
Imagine an auction where a unique item is being sold one at a time. There are 50 buyers in the room, but no one knows how many items will be available.
The first few auctions go wild. Bidding is competitive, prices rise, and buyers feel confident.
As prices climb, it establishes a psychology of “fair market value.” Everyone expects the next item to sell for at least as much, if not more.
This pattern continues until the second-to-last buyer wins their item.
Then something strange happens.
The auctioneer puts up the final item… and no one bids.
Why? Because all the buyers have already bought. There’s no one left who wants the item at the prevailing price.
The auctioneer lowers the asking price — still no bids. Now, all the previous buyers start feeling uneasy.
“Wait a minute… why isn’t anyone buying anymore? Did I just overpay?”
A few start trying to sell their items… at first at a small loss, then at deeper and deeper discounts.
Soon, panic sets in. The item that was a hot commodity five minutes ago is now something no one wants.
This is exactly what happens in the stock market when bullish sentiment reaches extremes.
The Stock Market Is a Purely Psychological Game
If you were buying a TV, you wouldn’t panic if its price dropped after you bought it. Why? Because you’re buying it for its use.
But stocks? They have no intrinsic use.
A stock is only worth what someone else is willing to pay for it later. That’s why stocks are uniquely vulnerable to emotion-driven sell-offs — because their entire value is based on perception.
This is what drives both buying panics and selling panics:
When everyone wants in, FOMO pushes prices higher.
When sentiment shifts, the same force works in reverse.
And this is why mainstream financial media can be a powerful contrarian signal.
Why Bullish Headlines Can Be a Red Flag
By the time a magazine cover, financial news site, or TV show is confidently predicting a higher market, bullish sentiment has often already gone mainstream.
Think about it: Financial media exists to sell content. Their job is not to predict the future but to write what people want to read.
If bullish stories dominate, it’s because bullish sentiment is already widespread.
If investors are confident enough to pay for content celebrating a rally, it means most of them are already positioned bullishly.
And if everyone who wants to own stocks already owns them, who’s left to push prices higher?
This is why major bullish calls from mainstream sources often come near peaks, not bottoms.
The Sentiment Trap: Right Idea, Wrong Timing
Now, does this mean that every time sentiment is high, the market is about to crash? No. Sentiment indicators are relative, not absolute.
History is full of moments where traders correctly identified overbought/oversold conditions but were way too early.
In 2008, some contrarian investors thought it was time to buy when bearish sentiment hit 60%.
Then they thought the same at 65%, and 70%, and 75%…
The market didn’t bottom until bears hit 90%+.
This is why contrarian signals are tricky. Sentiment extremes tell us where we are in the cycle — but not necessarily when the turn will happen.
Extreme sentiment signals can always become even more extreme.
Sentiment can stay euphoric — or panicked — longer than seems possible (As Keynes said: “Markets can remain irrational longer than you can remain solvent.”). The trick isn’t just spotting when everyone is in, but recognizing when the crowd is already exhausted.
Final Thoughts: Recognizing the Warning Signs
Markets don’t top because of bad fundamentals. They top because there’s no one left to buy.
By the time bullish sentiment reaches the mainstream, risk is rising — not falling.
So next time you see a glowing headline about how stocks are “only going higher,” stop and ask yourself:
If everyone is bullish, who’s left to buy?
Because when there’s no one left to push prices higher… the only move left is down.