as money conditions. It is impossible to have a
big bull market without plenty of money. During a bull market nearly all
stocks are bought on margin, which is explained in Chapter XVI. This
makes it necessary for brokers to borrow large sums of money. When money
is tight, it is impossible to get enough to carry on a large movement in
stocks.

You will see, therefore, that the Federal Reserve Bank has it in its
power to regulate the stock market to some extent. In 1919 speculation
was carried very much further than it should have been, but undoubtedly
it would have been much worse had the Federal Reserve Bank not raised
interest rates and urged member banks to withdraw money from Wall
Street. While there was considerable criticism of that action, it
certainly was a good thing for the entire country.

In a period of depression, the banks accumulate money, and there always
is an abundance of money at the beginning of a bull market. During a
period of prosperity the banks' reserves decrease and their loans
increase. When you see these reserves go down to a very low point, it is
usually time for you to sell your stocks.

CHAPTER XIII.

MINOR MOVEMENTS IN PRICES

Within the major movements of stock prices, there always are several
minor movements, which are caused by various influences. One of the
important causes is the technical condition of the market. Another cause
might be called a psychological one. When stocks are moving up steadily
in a bull market, people closely connected with the market expect a
reaction and watch for it. The newspapers predict it. Consequently,
there is sufficient let-up in buying to allow the pressure of selling by
the bears to bring it about. However, the desire to buy during reactions
is so general, many people rush in to buy and this buying, in addition
to the covering by the shorts, puts the market up again; and if
conditions are favorable for a bull market, prices will go up much
higher than they were before.

In like manner, we have rallies in bear markets. Of course the
professional bears sell during these rallies, with the expectation of
buying later at a cheaper price.

These minor price changes mean more to the majority of traders than the
major movements. The major movements are so slow that people get out of
patience, and yet those who are guided only by the major movements are
operating on a much safer basis. We believe that a greater amount of
money can be made, wi