If Gold’s Investor Cycle Low were behind us, then this would be one weak and lifeless 1^st Daily Cycle.  Typically the rally after a bloodbath Investor Cycle Low is impressive enough where you just know it’s a 1^st Daily Cycle.  It doesn’t necessarily need to be a V like rally, but in general you should see broad buying day after day and strong daily closes.  By Day 10, a 1^st Daily Cycle has typically gone a long way to recovering much of the previous drop, but here gold has barely made a dent into recovering any. 

So to this point gold has not shown any of the strength that has me thinking this is a 1^st Daily Cycle.  I have been a little patient on the Cycle because the dollar was soaring, so I have waited for the dollar to drop to see if gold released quickly to the upside.  Today was that day for gold and unfortunately the dollar’s plunge did not equate into a broad precious metal sector rally.  Again as I observed over the weekend, silver and the miners were both flat again today.  This indicates that there just isn’t any meaningful interest in this sector yet. 

Yet again we’re told that Friday’s announcement that 195,000 jobs added in May were “solid numbers”.  It’s funny what passes as solid these, this number in any past economic recovery would have been labeled as ordinary.  Even so, behind these “solid gains” were plenty of reasons for concern. The number of people working part-time because they can’t find full-time jobs and the number who want jobs but have given up looking both jumped sharply.  Because of this the U-6 rate jumped half a percent to 14.3%.  This measure is much broader and it marked the biggest jump since 2009 and back to the highest level since February.   

But employment is a lagging indicator and this week we also had a significant drop in the non-manufacturing ISM.  We know that the manufacturing numbers have been weak for some time, so to see a decline in the more significant non-manufacturing (Services) ISM does not bode well for the economy.  Looking at the composite of the two ISM indices (below) we see that both the recent and longer term trends are now down.  Despite the FED’s trillions of liquidity, this business Cycle has clearly topped and is in the process of moving towards the next trough.  That means a guaranteed print at some point below 50 (contraction) followed by an inevitable recession.

Source: Bedspokeinvest.com

According to the National Bureau of Economic Research there have been 33 business Cycles since 1854 with an average Cycle length (trough to trough) of 56.2 months (4 year 8 months).  Since 1945 we’ve seen 11 Cycles for an average length of 69.5 months (5 Year 9 months).   The current business Cycle troughed in June of 2009 making this the 49^th month of this Cycle, so we’re just 7 months away from the average Business Cycle Low.  If we narrow the focus to just post WW2 Cycles, we’re 20 months away from the next Business Cycle Low.  When you consider that most business Cycles spend up to a year contracting, we can appreciate just how far along this business Cycle is.  That means a recession late 2013 and certainly by 2014 is very probable.