/biz/ - Business & Finance

"A market (or a stock) is said to be in a weak technical position on the bull side when the buying power has been exhausted, either in a small or a large way. A campaign of distribution exhausts buying power in a large way because much of the floating supply of stocks is then in the hands of traders and the public. Sponsors and large operators have sold. Those of the public who still hold these stocks are potentially bearish factors because, having bought, they must sooner or later sell, and their selling will bring pressure upon the market.

This was the case in 1929. The whole market became saturated with stocks held by those who were looking for profit. Public buying power was exhausted. When these holders started to sell, they found little market for their shares.

As the price of stocks declined, more and more were obliged to sell, or were scared into selling. The load of stocks on the market increased. Margins were impaired all through the list. Every seller helped to force prices down and thus weakened so many hundreds of thousands of accounts. The effect of this was cumulative. Increasing pressure bore down upon the market, which was totally unable to absorb the gigantic offerings. The result was a collapse and a panic that affected everybody in every line of business throughout the world."
Richard Wyckoff