In observing the equity markets over the last several weeks, we cannot help but be reminded of the Jimmy Cliff song, “Sitting Here in Limbo”, which was famously covered by Jerry Garcia. The first two lines go like this:

“Sitting here in limbo, like a bird without a song

Sitting here in limbo, but I know it won’t be long”

As investors, it does feel like we are in limbo, stuck between the push of higher growth and employment and the pull of higher inflation, higher rates, and policy risk. And and the end of the day, despite quite a lot of directional volatility so far this year, the S&P 500 trades at the same level as it did back on January 4th. But, it’s not just the level of stock prices that seem to be stuck in limbo, internal measures of stock market breadth are also stuck in this sort of no-man’s land.

For example, when we look at a simple indicator of the percentage of stocks in uptrends – those with their 50-day moving average price that is higher than their 200-day moving average price – we observe a reading of 54% that looks to be falling quickly towards 50%. In other words, when we peak under the surface, only about half of US stocks are in uptrends. But is it even important? It turns out, yes.