It’s Time for the Santa Claus Rally Historically, Santa’s gift to Wall Street and Bay Street at this time of year is a short, but sweet rally lasting three weeks. The Santa Claus rally each year on average occurs from December 15th to January 6th. The S&P 500 Index has advanced in 20 of the past 27 periods since 1990. Average gain per period was 1.63% Santa Claus has been slightly more generous to Bay Street investors. The TSX Composite Index also has advanced in 23 of the past 27 periods. Average gain per period was 2.44%. The Santa Claus Rally occurs primarily because of several annual recurring events: · Tax loss selling pressures are relieved just after the Christmas holiday · Many investment dealers release upbeat reports during the period. The reports offer encouraging comments on equity markets for the following year. Top picks for the following year frequently are announced. · Individual investors are in a good mood during the Christmas holidays. Their mood spills into equity markets at a time when they have a greater influence over equity prices. Institutional investors have less influence during this period because most close their books for the year several days prior Christmas and don’t resume significant trading until several days into the New Year. · Individual receiving year-end bonuses and institutional investors receiving year end funds from pension plans add to equity gains in early January. What about this year? Circumstances in equity markets are encouraging, but slightly different than other years. Most world equity markets have recorded significant gains in 2017. Even the underperforming S&P/TSX Composite Index is trading near its all-time high. Most equity markets are intermediate overbought based on historic fundamental and technical measures. However, performance by major sectors has diverged more than usual. Economic sensitive sectors in U.S. and Canadian equity markets including Consumer Discretionary, Materials, Industrials, Financials and Technology have led the advance. Investors are reluctant to take profits in these sectors prior to end of the current tax season. Meanwhile, underperforming sectors including precious metals, energy and oil services have come under significant tax loss selling pressure during the past six weeks, particularly in Canada. These sectors also have a history of reaching an intermediate bottom in mid-December prior to a seasonal trade into spring. Accordingly, they are top candidates to purchase for a recovery during this year’s Santa Claus rally period. What happens after the Santa Claus rally is over this year? Intermediate momentum indicators show that investors are in a “Sell into strength” mood. Profit taking pressures by individual and institutional investors are expected to accelerate in most sectors after the first week in January other than in the oversold precious metals, energy and oil services sectors, In conclusion, enjoy the Santa Claus rally this year as long as it lasts. Take short term advantage of deeply oversold equities that have been liquidated due to tax loss selling pressures. Be prepared to take trading profits just before or after the Santa Claus rally has ended. Observations Response by equity markets to the Federal Reserve’s announcements at 2:00 PM EST was muted. The Fed Fund rate was increased by 0.25% to 1.25% as expected. Early gains recorded after 2:00 PM were lost by the close. Greatest response was in currencies (U.S. Dollar Index, Canadian Dollar) and precious metals (equities and prices) U.S. Dollar Index plunged after 2:00 PM Canadian Dollar surged Gold surged Silver surged Gold and Silver equities and related ETFs surged. StockTwits Released Yesterday @EquityClock United Kingdom iShares $EWU moved above $35.46 extending an intermediate uptrend. Technical action by S&P 500 stocks to 10:00: Quiet. Breakouts: $STT $FCX. Breakdown: $ROP Editor’s Note: After 10:00 PM EST, UHS broke intermediate resistance. No stock broke support First Quantum Minerals $FM.CA, a TSX 60 stock moved above $16.59 re-establishing intermediate uptrend. Imperial Oil $IMO.CA , a TSX 60 stock moved below $39.02 completing a Head & Shoulders pattern. First signs of seasonal strength in silver stocks! First Majestic Silver $AG moved above $6.96. ‘Tis the season for strength in silver and silver stocks from mid-December to the end of February! $SIL $SLV Cdn. gold stocks respond to U.S. Dollar weakness/higher gold prices $BTO.CA ELD.CA ‘Tis the season for strength in Canadian gold stocks from mid-December to the end of February! Trader’s Corner Daily Seasonal/Technical Equity Trends for December 13th 2017 Green: Increase from previous day Red: Decrease from previous day Daily Seasonal/Technical Commodities Trends for December 13th 2017 Green: Increase from previous day Red: Decrease from previous day * Excludes adjustment from rollover of futures contracts Daily Seasonal/Technical Sector Trends for December 13th 2017 Green: Increase from previous day Red: Decrease from previous day Keith Richards’ Blog Outlook for Equity Markets. See http://www.valuetrend.ca/outlook/ S&P 500 Momentum Barometer The Barometer slipped 0.60 to 74.00 yesterday. It remains intermediate overbought. TSX Momentum Barometer The Barometer added 1.05 to 53.11 yesterday. It remains intermediate neutral Disclaimer: Seasonality and technical ratings offered in this report and at www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed