Sign of Weakness

A Wyckoff term for a decisive price decline on expanding volume that breaks below the distribution trading range — confirming that institutional supply has overcome demand and the markdown phase is beginning.

The Sign of Weakness (SOW) is the distribution-phase equivalent of the Sign of Strength. After the Upthrust traps late buyers, or following the later stages of distribution, a sharp decline develops — typically breaking below the support level of the distribution range — on expanding volume. This is the moment when institutional selling overwhelms the remaining demand and the absence of professional support becomes evident. The SOW confirms that distribution is complete and the markdown phase has begun.

The characteristics mirror the SOS in reverse: wide-range down-bar, closing near the low, high volume relative to recent bars, and a move that carries into or through the support of the prior trading range. A breakdown on light volume may be a bear trap or short squeeze setup; a SOW on expanding volume is a structural confirmation of supply dominance.

After the SOW, Wyckoff analysts watch for a "Last Point of Supply" (LPSY) rally — a weak, low-volume bounce back toward the breakdown area that fails to recover the lost ground. This LPSY is the optimal short-entry point: entry on the failed rally, stop above the upthrust high or upper range boundary, with the full markdown phase as the objective. The SOW-to-LPSY sequence is the bearish analog of the spring-to-back-up sequence in accumulation.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.