What a Week: Bears Bloodied

"There's absurd amounts of cash on corporate balance sheets, and private equity has become a huge force in this marketplace," says Noah Blackstein, portfolio manager at Dynamic Funds in Toronto. "That can provide liquidity for the stock market. Plus, because of Sarbanes-Oxley, the U.S. has had no real IPOs of any magnitude."

The combination of M&A and limited new offers has shrunk the supply of stock available to trade and is very bullish, says Blackstein -- although this week did see big secondary offerings from Micron Technology (MU Quote) and Goodyear Tire (GT Quote).

The latest week of M&A madness kicked off with Monday's blockbuster private equity deal for the Chrysler division of DaimlerChrysler (DCX Quote), which generated optimism about GM (GM Quote) and Ford (F Quote).

There were other highlights:

• Merck KGaA agreed to sell its generic-drug business to Mylan Laboratories (MYL Quote) for 4.9 billion euros ($6.63 billion), and Cardinal Health (CAH Quote) agreed to buy Viasys Healthcare (VAS Quote) for about $1.42 billion.
• Bausch & Lomb (BOL Quote) agreed to a private-equity deal with Warburg Pincus valued at $3.7 billion, and Agile Software (AGIL Quote) agreed to be bought by Oracle(ORCL Quote) for $495 million, both on Wednesday.
• Thursday brought private-equity takeovers of Alliance Data Systems (ADS Quote) and Acxiom (ACXM Quote), while 24/7 Real Media (TFSM Quote) agreed to a takeover by the advertising firm WPP Group (WPPGY Quote).

When even companies with questionable fundamentals like Bausch & Lomb are acquired -- at hefty premiums -- it's hard to be a bear, as I discussed on "The Real Story" podcast Wednesday.

In a similar vein, Alliance Data and Acxiom "are basically humdrum, not-really-interesting stocks that just got very big bids," Jim Cramer commented this week. "The kinds of bids that, if you [short] a lot of other companies, you run the risk of looking stupid when they too get bids."

Further potential shrinkage of stock available to trade came in the form of buyback announcements, which gave a boost to a number of firms this week, including Intuit (INTU Quote), Ingersoll-Rand (IR Quote) and Sun Microsystems (SUNW Quote).