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Here is what top Citi analyst Fitzpatrick said in two reports, along with powerful charts:  “Initial Claims, one of our favorite leading indicators of the overall economic picture, appear to be bottoming, pointing to a deteriorating employment situation in the US. Additional red flags are being raised by Small Business, ISM and Consumer Confidence.


Fitting with idea that a low could be forming just as it did in late 1978.




A continuation of this trend would suggest levels back towards 475k could be seen this year with possibly even higher levels in 2014.




However, we need to be careful here given the dynamics of the distortion caused by the participation rate, temporary job creation, demographics (Youth versus older worker job creation).  This argues that if anything the present level of unemployment “flatters” the real picture where underemployment still stands at 14.4%.


Continue reading the Tom Fitzpatrick piece below...




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This also suggests to us that Equity markets will move lower this year, falling 20%+ in the case of the Dow Jones (high to low), and that the biggest part of the down move will come in Q2 or Q3 of 2013.


From January 1977 the market started to drop and was over 20% off the late 1976 peak by October (see chart below which shows the DJIA 1973-1977 action vs today).




We continue to believe that the present trading pattern is similar to that seen before the move higher in 2007 and can yield a move towards $2,400-2,500 by the summer of 2013.






Bottom line:

We continue to believe that the charts above are compelling and suggest:

– The economy and in particular the employment picture look set to once again deteriorate with initial claims set to move higher over 2013 and possibly 2014.  The pictures on small business, ISM and consumer confidence are all “flashing red” for us.


We continue to expect the Equity market to move lower this year with the down move possibly extending  into 2014.  At least a 20%+ fall in the DJIA (High to low) and possibly as much as 27% is still our bias. Again, as in the fixed income markets we suspect that the interference/kicking the can dynamic means that the moves lower in both yields and Equity markets may be more extended in time taking us into late Q2/early Q3.


© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


The interviews with Egon von Greyerz, Ben Davies, Kevin Bambrough, Nigel Farage, Eric Sprott, Art Cashin, Stephen Leeb, John Embry and John Mauldin are available now.  Also, be sure to listen to the other recent KWN interviews which included Michael Pento, Gerald Celente, Andrew Maguire and James Turk by CLICKING HERE.


Eric King

KingWorldNews.com

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