Jobs Lag, Leading Indicator Signals Slowdown: Pros

On Friday investors were trying to figure out if the the latest jobs report was an early sign that bull was about to charge.

According to the Labor Department, employers added 227,000jobs last month; that makes the last 3-months the best months for hiring since the recession began.

But jobs are a lagging indicator.

The Fast Money pros were more interested in leading indicators and Citi strategist Tobias Levkovich tells us leading indicators that he follows suggest there’s at least some cause for concern.

“One of the best leading indicators has been the Federal Reserve Board Survey for Commercial and Industrial Lending Activity. It leads job trends by about 9 months, consistently”

And Levkovich says the activity isn’t bullish. “What the data is telling us now is that the job growth that our economy has been enjoying will slow down. And that’s without the impact of higher gas prices. That’s only the (ripple) from a slow Europe filtering back.”

He goes on to say, “I’m worried about Europe – the bite from austerity programs is still to come. That will be a little bit of a drag.”

And in the near-term Levkovich sees another negative catalyst, the Citi Economic Surprise Index suggests aggressive areas of the market are due for a pullback, statistically.

All told, the action suggests stock could be facing challenges.

“We’re looking for a short term pull back,” he says. (However it’s worth noting Levokovich has a 1425 price target on the S&P for year’s end.) “Think about it this way – we’re 4% away from our price target for year–end and we could have a 5% pullback.” Although he’s ultimately looking for more gains he also says at these levels, “be selective.”

That thesis is something that both Abigail Doolittle and Steve Cortes have been saying for quite some time.

Doolittle points to the action in the Russell as a key tell. While other indexes marched higher in February the Russell moved sideways. “The Russell didn’t have the tailwind from Apple ,” she explains. (In other words, Doolittle believes enthusiasm about Apple may have caused the S&P to overshoot to the upside. If her analysis is correct, it suggests markets are overbought.)

Looking at the current weakness in the Russell and extrapolating that the S&P, Doolittle says, “we're probably looking at a drop of 5-10%.”

Trader Steve Cortes agrees entirely. “It’s unsettling that in February the Russell lagged and key sectors lagged while the other indexes advanced,” he says.

Also, Cortes believes it’s significant that Beijing’s admitted to slower growth in China earlier this week. “That was meaningful,” he says. He believes the admission will drag down stocks that are tied to China; names such as Freeport McMoRan and Potash. (In turn, that weakness would drag down the S&P.)

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Trader disclosure: On Mar 9, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karabell is long AAPL; Karabell is long IBM; Karabell is long TGT; Karabell is long JOYG; Karabell is long SBUX; Karabell is long ADSK; Karabell is long FCX

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