Date: December 28, 2017

Where is Santa Claus?!?!

Last week, I wrote about the much heralded Santa Claus Rally and last five trading days of the year. If you weren’t able to read the piece, I think it’s a good unbiased analysis debunking the notion that this time of year is like shooting fish in a barrel. With 2012, 2014, 2015 and 2016 all limping in to close the year, the trend has really been quite the opposite. So far in 2017, Santa has barely been seen with but one day left in the year.

Now before you conclude that the bears have been in control lately, the Dow, S&P 500, S&P 400 and Russell 2000 have all basically gone sideways of late with the NASDAQ being the weakest index, down marginally. It still seems like the bulls should resolve this little range with an early 2018 upside breakout next week. Banks, transports and discretionary all look like they want to run higher into January while semis have really disappointed and have me questioning whether their leadership has ended for a while.

High yields bonds, which have rallied of late, are still well below their Q4 all-time high peak. That’s my biggest domestic concern heading into 2018. However, the NYSE A/D Line continues to make all-time highs which should forestall any bear market or full fledged correction for the foreseeable future.

Currencies have been unusually quiet for this time of year, but that’s one asset class where I see fireworks in 2018 as the massive capital flows into the US I have mentioned for years should finally come to fruition. At the same time, while commodities have rallied this quarter, I see that asset class as having much more upside potential with crude well on its way to my $100 target over the next few years.

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Paul Schatz, President, Heritage Capital