Employment

The average rate of growth in private payrolls has slowed down steadily during the last months to a level that may mark an inflection point. Any lower than this and the economic expansion is in peril, similar to 2007. We could see a bounce from here, the most likely scenario, but it could tip the Fed towards tapering early next year.

NYHL

I have talked recently about signs of a peak in the business cycle, but the stock market is ignoring them.

The chart above is that of the difference between the 52-week New Highs and the 52-week New Lows for the NYSE.

The rally in 2013 was accompanied by a huge expansion of new highs vs. lows and this is still the case on the latest surge to historic highs for the S&P500. This often signals short term capitulation, but the longer term implications are positive for the overall bull.

For me, the latest bull leg has began at the end of June, after the 7% correction, and it is up 12% as of Friday. A 16% rise, which is quite average, would take the market to 1800.

Treasuries and Gold

The chart above shows the December weekly futures contract for the 10-year T-Note.

The T-Notes have a good track record of anticipating turns in the business cycle and, implicitly, in the stock market. The rise in September and the possible trend reversal if the highlighted level is broken, are similar to the behavior at the  2007 and 2011 peaks, confirming the scenario of at least a slowdown in the economy.

If we interpreted Gold as a fixed income asset (here is why), then it has a lot of upside potential. Gold also started rising in the past just before major economic slowdowns.

Here is a weekly chart of the December contract for Gold.

GDP

The chart above is that of the quarterly percent change in real GDP with a 4 period moving average (blue line).

The weakness of this recovery is clearly visible. The average has not reached the level of 1% (marked by the red segment) as it did during the previous expansions. This is coming after a very sharp contraction so it is not a good sign for the long term.

Also, the average has crossed  the purple horizontal line from the upside during bear markets. It is now very close to it again. With the GDP expected to have slowed down in Q3, we might get a signal again very soon.