New highs abound

The market saw an astonishing number of new highs on Friday. Are we approaching a correction?

By Kim Peterson Apr 27, 2010 12:20PM
© Kyu Oh/Getty ImagesWhen a stock price hits a new high, investors take notice. When the market sees 634 new highs in one day? Well, that's breathtaking.

Friday was a new-high bonanza, according to stock market blogger Chris Perruna. The 634 new highs on the NYSE that day were more than any seen in years.

There has only been one day with more new highs, Perruna writes. That would be Oct. 11, 1982, when 653 new highs materialized.

What to take away from this? Yes, we are in an uptrend, Perruna writes. And what goes up . . . well, you know the rest. Are we going to see a correction? Time to look at some good shorts?

How long can this market sustain higher stock prices based on faulty growth? You can only take so many cash advances on your credit cards without paying before they cut off your borrowing capacity. Maybe I have it all wrong, but I am concerned long term. Short term, the market is higher unless it says otherwise.

Let's turn to Bloomberg for a counter idea. U.S. stocks are still the cheapest in two decades, even after this rally, the news service reports.

 

 Post continues after video:

That's because profit estimates for companies on the S&P 500 Index rose an average of 9.3% in April, but their stock prices only rose about half that much.

"Income is beating analysts’ estimates by 22% in the first quarter, making investors even more bullish that the rally will continue after the index climbed 79% since March 2009," Bloomberg writes.

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