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NEW YORK ( TheStreet) -- Believe it or not, there's a shortage of stock for sale, Jim Cramer told "Mad Money" viewers Tuesday as he explained how a stock like EOG Resources (EOG - Get Report) can trade up 7.6% in a single day.
Cramer said that every day there is stock for sale at different price levels. For individual investors there usually aren't any problems finding someone selling a stock at a price near what they want to pay. But today's markets aren't driven by individual investors, he noted -- they're driven by the big boys, institutional investors managing huge pensions, mutual funds and hedge funds.
In order for the big investors to make a meaningful impact on their portfolios, they must buy in huge increments, said Cramer, to the tune of 200,000 shares or more at a time. These funds are under constant pressure to outperform both the averages and their peers, which means that funds often need to buy those 200,000 shares in a hurry.So what happens when these managers begin looking for stock to buy? Cramer said they don't find blocks that large at the stock's current price, and quickly turn to higher and higher prices in order to complete their orders. As the price increases, more sellers come in. But in a hot market that's on the rise, even those sellers may be few and far between. In the end, Cramer said a fund hoping to buy 200,000 shares at the current price can easily end up paying 7.6% more, which is exactly what happened with EOG by the end of today's session. That's why it's a seller's market, Cramer concluded, because there are simply more buyers than those willing to sell.