Cramer: Tight Supply Squeezes Us Higher

This column was originally published on RealMoney on April 25 at 11:26 a.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Where the heck is all of the supply? For six years stocks have meandered with sellers always above the current prices. That caused an endless chew-through that often could not be eaten.

How many times have you seen big upside surprises and gotten nothing special in the stock's price action, maybe a point up, and then two weeks later, the sellers would be back, motivated and blowing out of shares. This is the concept, if you have ever traded institutionally, of having heavy offerings that serve as a roof and then, in a few days, you get the sellers off the offering and hitting the bids.

Now, you have the opposite. Whether it's today's Amazon(AMZN Quote), Aflac(AFL Quote), Air Products(APD Quote), Black & Decker(BDK Quote) or Bard(BCR Quote), or all-week stocks such as Honeywell(HON Quote), Paccar(PCAR Quote), Cummins(CMI Quote) or Whirlpool(WHR Quote), you have limited supply. That's how you get these gigantic one-day moves that are then not repealed.

Earlier today I opined that if you just willy-nilly buy back stock without a sense of cheapness, you waste shareholders' money. But if you have conviction, as all of the companies mentioned here have, you get a delicious combination of buybacks that have taken out excess supply and institutions that can't get in without paying up.

But let's add in something else, something truly amazing, an away team that gets blown out by these numbers. That's the hedge funds. They are providing the offerings ahead of many of these quarters -- check out Amazon -- and just borrowing that inventory, and have to buy it back much higher.

It's amazing to me, as someone who has had to ask for offerings to buy stocks when I wanted to buy them in size, how few firms will even offer stocks. They don't want to be in short supply. So the supply can't be found until you take stocks up 2, 3 or 4 points in a session, or even 10 points over a multiple days.