As our confidence builds collectively, things start going right again. Remember to look for the signs. Last week, all secondaries failed. (A secondary is a follow-on offering of a stock, much like an IPO, except the company is already public.)

Wednesday, the secondaries worked. I bought some

Tibco Software


, a company that has been brought down unmercifully, on a secondary and was pleasantly surprised to be up nicely by the end of the day.

Not only that, but many of the secondaries that were heavily underwater started lifting yesterday, like

Electronic Data Systems





, to name two that have dogged this market.

Why is this so important? Because it has to do with the basic supply and demand that drives the stock market. You as an individual may not realize it, but brokerage houses "position" stock for clients all of the time. That's the insider term for "they buy them when you don't want them."

Let's take it out of the realm of personalization. Say Cramer Brothers places a secondary of red hot


at 90 after it has come down from 140 where the secondary was announced. I am Mr. Big Shot, manager for a giant mutual fund. Of the 4 million shares of National Gift that that are being offered (2 million by the company and 2 million by insiders), I take down 50,000 shares.

From the get-go, this stock doesn't hold 90, which is known as the print price. At 84, I call Cramer Brothers and we have a talk. It goes like this:

"I did $2 million in commissions with you already this year, and this National Gift is killing me. I have to take the loss. I want you to buy it from me."

Cramer Brothers wants to stay in this game. So, reluctantly, he purchases your 50,000 shares back, probably at 82, as the word is out that this deal was a real dog and placed in real bad hands.

Now, what does Cramer Brothers do with your 50,000 shares, plus all of the other National Gift he's had to eat from other equally angry, equally big Mr. Big Shots?

He sits on it. He takes it down. He hopes. He tries to lay off some but everybody is "full up."

In the business we say Cramer's "lugging." He's long. You never want to be long in a down market.

If all of the brokers are all similarly situated, if they are all lugging, that's part of the unseen-to-the-naked-eye part of the stock market that can really cause a decline. You want brokers to be lean, not lugging. You want that because, ultimately, they have no staying power.

Can you imagine how much merchandise they have to take down in a bad tape? Can you imagine how much they have to lug? Billions and billions of dollars, for which they have tremendous borrowing costs. It costs a fortune to lug, both from the carrying costs and from the losses on the merchandise that goes down.

A really powerful rally rarely starts when brokerages like Cramer Brothers are lugging. They have to be lean. They have to have no merchandise. That causes institutions to reach up and buy, which, of course, is what makes a stock go up instead of down. That's why I monitor this

Ben Holmes

stuff so closely. It is another clue to how the market will do in the very short term.

Go back to his

articles. Call them up. They are really great. See how recent secondaries performed. They are a great barometer for the direction of the market. They are not out of the woods yet, but they are much healthier than they were a week ago. Merchandise is being placed in much firmer hands. That's good news for the bulls.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Tibco Software. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at