Source: FRED

The unemployment rate is very low and trending sideways.

Source: FRED

In conclusion, the labor market indicators suggest a very late-cycle bull market, but not long term bearish yet.

It’s also worth noting that in the past, lending standards tightened before bear markets and recessions began. Lending standards are still very loose today.

Source: FRED

Meanwhile, Heavy Truck Sales just made a new high for this economic expansion. In the past, Heavy Truck Sales trended downwards before bear markets and recessions began.

Source: FRED

And lastly, the widely 10 year – 2 year yield curve has almost inverted. While this is a late-cycle sign, it is not a timing indicator for bull market tops. The yield curve can invert long before a bear market or recession begins.

Source: FRED

Medium Term

Our medium term outlook (next 6 months) still leans bullish, although the market studies are no longer as bullish as they used to be. There are some medium term bearish studies mixed in with the bullish studies.

*For reference, here’s the random probability of the U.S. stock market going up on any given day, week, or month.

This week’s S&P 500 decline has been interesting. The S&P fell more than -1% while VIX also fell more than -5%. This is unusual, because the S&P and VIX (volatility) usually move in opposite directions.

Source: StockCharts

Here’s what happened next to the S&P when the S&P fell more than -1% in the past week, while VIX fell more than -5%.

*Data from 1990 – present

As you can, the stock market tends to go up 6-12 months later, even if it does face short term weakness over the next 1 week.

Meanwhile, VIX tends to fall.

A really interesting CNBC article caught my eye:

Source: CNBC

I wanted to see if CNBC is right. Is the divergence between earnings & stocks a bullish sign for stocks?

Here’s what happened next to the S&P 500 when the P/E ratio fell more than -17% in the past year while the S&P was down less than -3% (i.e. valuations depressed despite high earnings growth).