Meisler: Why Common Stocks Are Absent from New Highs

Let's start with oil. Yes, I thought it would rally last week. No, I didn't think it would rally this much. I thought mid-$60s and we'd struggle. I clearly underestimated the number of folks who had piled in on the short side when we came down that day.

So let's go back to the chart (lower on this page). That line that I drew in is so obvious I'm certain even folks who don't know how to draw a trendline can see it. Therefore, it would not surprise me if we saw oil stop between here and there and confound all of us.

As for the stock market, there's no rest for the weary. It refuses to rest. Or does it?

The number of stocks making new highs on the New York Stock Exchange has been terrific. I have praised this reading on a regular basis (as opposed to my complaints about Nasdaq's new highs). Monday's reading was no different. The reading jumped and soared -- 177 new highs on the NYSE. I would, however, ask that you take a few minutes and read the list. It is found in the Wall Street Journal each day, and probably many other sources as well.

Ask yourself how many names you recognize as real stocks, how many names you recognize as real companies. I'm guessing the first thing you'll notice is that the list is filled with bond-related names, preferreds, closed-end funds, this trust or that trust, real estate investment trusts, American depositary receipts. You name it, it's in there. But where are the common stocks?

When we take out all those non-stock names we come up with a list that is actually rather puny. Monday's list of common stocks (minus foreign stocks, and REITs and all those other non-US common stocks) chimes in at 30. That's not a typo.

Sure, the discrepancy has been there all along but Monday's was outright glaring. You see on July 23, there were 108 new highs on the published NYSE list. And there were 45 common stocks. I can live with that as that is a fairly normal ratio in these times. But to see the published list rise by 65% and the common stocks fall by 33% Monday is a bit out of whack. And not so bullish.

Nasdaq's new highs too peaked on July 23. There was a very respectable 119 then. Last Thursday was a bit disappointing with 115. Monday's 95 was even more disappointing.

Now I know the media is excited about the rise over 1000 for the S&P 500. But being such a stickler for numbers I noted the high on Oct. 13 was 1003. The high on Nov. 4 was 1005. I am sure it's a distinction without a difference but it struck me that we've gotten over 1000 before and petered out. Round numbers are the stuff the media fusses over. You do remember the Dow 10,000 party hats on the floor of the NYSE, don't you?!

I will stick with the view I've had. We're overbought (and now the oscillator is at a lower high) and I think the market needs to reduce the excess it has generated. The number of stocks making new highs, or shall I say lack thereof, tells us how tired they are. However, until the intermediate-term indicators roll over the downside ought to be contained.

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Know What You Own: Some stocks that made new highs on the NYSE on Monday were Lubrizol(LZ Quote), Chico's(CHS Quote), AmeriCredit(ACF Quote), Penske Automotive(PAG Quote), Cooper Tire(CTB Quote), Suburban Propane(SPH Quote)and Oshkosh(OSK Quote).