When insiders exercise and then sell an option, the company takes back the exercised price and withholds estimated capital gains taxes. While there is no cash in the stock market, there is cash sitting in the checking accounts of stock market intermediaries. The best leading indicators of future stock market performance are the actions of corporate investors. When corporate investors are net buyers of their own and other public company shares, the overall market sooner or later goes up. Similarly, when corporate investors are net sellers, stocks go down.
Mutual fund flows, while large in size, are of less value as a leading indicator.
Recent independent academic studies corroborates our view that flow is a coincident indicator, that is, knowing which way the flow will be going is often the key to determining short term swings in the direction of the market. Key to liquidity theory is that stock prices and liquidity are a coincident indicator. Academics have proven that liquidity and market change are coincident indicators. That means liquidity changes in the same direction as the market does. Therefore, if one knows where liquidity is headed, one knows where the market is headed.