Weekly Economic and Stock Market Commentary: December 27, 2021

The bears took the occasion of the winter solstice to go into hibernation, at least for the shortened holiday week. All the major market averages made great gains for the week.

Last week I described two off-beat indicators pointing in opposite directions. The winner was the contrarian reading of the American Association of Individual Investors which had bullishness at a very low level. That signaled excessive selling to me, and buying happened last week.

I have a correction to make from last week (good thing I don’t think this week’s letter will get much attention). I wrote the NYSE was on offense, when, in fact, it was on defense. The Optionable Bullish Percent indicator flipped to offense last week. The nature of the indicators, despite a likely flip very soon, requires a recommendation of WEALTH PRESERVATION.

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of December 23, 2021 (Courtesy Dorsey, Wright, and Associates).

The Department of Commerce gave us the final report on economic growth for the 3rd quarter. They stated the economy grew at an annualized rate of 2.3%, up from 2.1% announced in November.