Should we escape the top? The principle of the fish tail market in the stock market

Author: Dave.𝟎𝐱U

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

The Misconception of "Tail-End Market" and Blindly Guessing the Peak

The so-called "tail-end 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 peak. Later, people likened it to three sections of a fish: fish head, fish body, and fish tail. Among them, the profits of the fish tail are often accompanied by great danger, advising everyone not to follow the trend blindly.

However, as the market continues to evolve, there has recently been an increasing number of "tail-end market" , which refers to the explosive rally 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 principle behind the development of the tail-end 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 United States 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 this 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 storytelling, 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 perfectly with people's psychological intuition: when everyone starts discussing, it means emotions are overheated, indicating a bubble, and that 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 possibly 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 End: It is not because of overvaluation or excessive bubbles, but because there are no new buyers.

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

When everyone starts paying attention to the U.S. stock market, marveling at the gains, and itching to act, this is not the end of the rally; rather, it is a precursor to the last wave. Because these onlookers, whose attention has been drawn in, have not yet truly put their money in. When they can no longer resist and real funds flood into the U.S. stock market, the release of buying volume begins.

The new funds from these retail investors will drive the last wave of stock price increases, with the main players coordinating to offload shares, handing the chips over to them. When they have all bought in, there will be no one left to 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 from 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 begun 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 invest their money, who else was left to buy? Once everyone has bought in, who will buy next?

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 invested their money, 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. Careless traders would 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 there was no one left to take over, so the market fell.

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 determine what potential buying volume remains unreleased.

Currently, it can be observed that the first wave of buying volume has basically been released.

• Taking 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 stage of the bull market.

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

Response Strategies and Future Market Outlook

However, it is not believed that this will lead to a direct and steep decline, as the release of buying volume is not instantaneous.

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

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

3. Profit-Taking Strategy: Regarding recent profit-taking exit strategies, I have already discussed this in a post; last Friday can be seen as the first instance of selling. It is time 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; decisions should be made cautiously.