The stock market keeps reaching new heights after stampeding past the record high set on October 3. Market bulls are positively giddy—but you may not want to break out the champagne yet. Some measures indicate this galloping bull market may not quite have broken loose.

Since October, when it breached the previous record of 11,750 set in 2000, the Dow has continued to climb, seemingly confirming that a new bull market is well on the way. On November 7, the Dow closed at 12,156. But don’t be fooled, says consultant Michael Nystrom: “[L]ook beyond the headlines, and you see a different story” (www.bullnotbull.com,October 3).

Nystrom contends that the Dow is still at least 1,662 points away from an actual new high. He says the Dow’s recent breakout is “phony” because when inflation is taken into account, the Dow is “nowhere near the old highs.”

Indeed, using the Federal Reserve Bank’s own consumer price inflation calculator, a Dow of 11,750 in 2000 is found to be equal to a Dow high of 13,817 today. In fact, the Dow would have to rise 13.7 percent from the current level to reach a true inflation-adjusted record. In other words, if you bought a mutual fund in 2000 that mirrored the Dow, even though it might be worth more today in nominal terms, in actual value or purchasing power you are still losing money.

Nystrom points out one other very interesting tidbit concerning the Dow: Of the 30 stocks that compose the Industrial Average, a full 70 percent of them were still at least 20 percent beneath their previous highs when the Dow set a new record on October 3. Take a few examples: In 2000, General Electric, Hewlett Packard, Home Depot, Merck, GM and Intel Corp. shares traded for $61, $69, $70, $90, $94, and $76 respectively; but as of October 3, they were down to about $36, $37, $37, $42, $33 and $21. That is a loss of between 41 and 73 percent of value for each of these stocks—not so good for stocks that compose an index indicating how well the economy is doing. In fact, as of October 3, only seven stocks had made new highs this year.

Yet, even though the Dow and many of its component stocks haven’t set actual new highs yet, it doesn’t mean that they couldn’t or won’t. Often, rising markets build upon their momentum, so we may witness a new real Dow high sometime in the future.

But does that mean investors should jump into the stock market now?

Not according to investor Paul Van Eeden. “The object of investing is to make money. That requires us to buy low and sell high. Right now U.S. stocks are at record highs [on a price-to-earnings ratio], long bonds are not quite at a record high but they are very high, and commodities are just slightly off their record highs. No buying candidates there” (www.gold-eagle.com, October 30).

The analysts at the Daily Reckoning agree:

Stocks are trading at very high multiples of earnings … but at a time when earnings are also at record levels. How much higher could they go? And if you did buy at this level … could the reward really be worth the risk? Ultimately, don’t stocks depend on the economy?Dear reader, we give you the short answer: Stocks are not a good investment. Not at these prices. That doesn’t mean they won’t go up any more. It just means that it is unwise for you to follow them. There’s more downside to worry about than upside to hope for. Take this little boost as a gift … sell on rallies.

Whether or not the stock market is a good investment is for you to decide. But be forewarned—don’t place all your trust in the media hype about a confirmed new bull market. The facts show that the bull still has a way to go before really breaking out.