The sequence is a description rather than a timing tool. Early in an advance, participation is low and the prevailing feeling is scepticism. As the move extends, optimism turns into excitement, then into a sense that the gains are easy, which is when participation and size peak. The decline runs the same ladder backwards: anxiety, denial, fear, capitulation, despondency.
Its usefulness is personal rather than predictive. Knowing where your own feeling sits tells you something about your risk-taking, and the moment when a trade feels obviously safe is worth noticing.
Treat the popular chart of this cycle with care. It is drawn after the fact, the labels are unmeasurable, and it fits every chart in hindsight. It is a language for discussing sentiment, not a signal. See euphoria and capitulation.
Related: euphoria, capitulation, herding, narrative-fallacy