While equities are currently extended by just about any measure, one indicator of breadth is showing a more neutral picture.  The 10-day advance/decline line is an indicator that takes the net number of rising stocks for a given day and adds them all together on a 10-day rolling basis.  In the chart below, readings in and above the red-zone indicate that the market is overbought in the short term, while readings in and below the green zone indicate a market that is oversold.

After recently hitting its most overbought levels since the rally following Brexit, the S&P 500’s current 10-day A/D line has seen quite a significant pullback in the last several days — moving into neutral territory.  One reason for the decline is due to breadth being relatively narrow in recent days.  Take Wednesday for example — even though the S&P 500 had its best day since the day before the election, breadth came in a +323 for the index.  Since the election, there have been three other days where the market was up less, but breadth was stronger.  Additionally, during the current bull market, on days when the S&P 500 rose 1% or more (as it did on Wednesday), the average daily A/D reading was +394.  So while the market continues to sit at or right near all-time highs, breadth has come in a bit.

Even though the DJIA just saw its longest streak of daily gains in three decades and US equities had their best day of the year on Wednesday, individual investors still want little to do with the stock market.  According to AAII, bullish sentiment for the latest week declined from 38.46% down to 37.91%.  This is the seventh straight week that bullish sentiment was below 40%, and a record 113 weeks that bulls have failed to take a majority.

While bullish sentiment declined, bearish sentiment rose up to 35.62%, which is just two percentage points lower than bullish sentiment.  Also, as shown in the chart below, bearish sentiment has been steadily trending higher after hitting a seven-month low in late November.

The S&P 500’s 1.37% gain yesterday was the sixth best start to March (1st trading day of the month) in the index’s history.  Below is a quick table highlighting all 1%+ gains on the first trading day of March for the S&P 500 since 1928.

You might not remember, but stocks started off last March with a bang as well.  The S&P was up 2.39% to start March 2016, and the index went on to gain another 4.11% for the remainder of the month.  Prior to last year, 2010 was the last time the S&P gained more than 1% to start March, and just like 2016, the S&P gained another 4%+ for the remainder of the month.  Including this year, the S&P has seen gains of 1%+ on the first trading day of March thirteen times (out of 90 years total).  In the prior 12 years, the S&P averaged a decline of 0.15% for the remainder of the month.  But that average decline is significantly impacted by the 25.8% decline seen for the remainder of March 1938.  If you take the median instead of the average, the rest-of-month change is +1.38%.  In the 77 other years where the S&P didn’t start March with a 1%+ gain, the index has seen a median rest-of-month gain of 1%.

Jobless claims saw their largest weekly decline of this short year in the last week, falling from 242K down to 223K.  This was the lowest weekly reading since March 1973, the 104th straight week where claims were below 300K, the fifth straight week claims were below 250K, and the seventh time in the nine weeks this year that claims have been lower than expected.  Suffice it to say, there’s not much negative to say on the claims front.  On the day of Snap’s IPO, it’s ironic to think that the last time claims were this low was when Polaroid was the camera company of the day that was all the rage.

With this week’s decline, the four-week moving average also plunged to a new cycle low of 234.25K.  That’s the lowest level for this measure since April 1973.

On a non-seasonally adjusted basis, claims were also extraordinarily low, falling to 213.1K.  That’s the lowest level for the current week of the year since 1969 and more than 140K below the average of 344.7K for the current week of the year dating back to 2000.

Keep in mind that as stocks keep rallying here, valuations are rallying as well.  The 12-month trailing P/E ratio for the S&P 500 just crossed above 22 today.  That’s 5.5 points above the index’s average P/E of 16.56 going back to 1954.  Below is a chart showing the S&P’s trailing 12-month P/E over this 60+ year time frame.  We’ve provided dates for previous highs that were reached.