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____ Friday December 4, 2015 ____

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Chart of the Week

Santa's Coming

by Mike Hayhoe, BSc, CIM

Kitchener - The S&P 500 has rallied during the final 30 trading days of the year for the last 12 years in a row! This is known as the "Santa Claus Rally".

How's that for a sure thing! 12 years running, though last year's 0.35% rally is hardly much of a run up.

As it stands now though, this year looks a little iffy. The last few days haven't been kind as the markets have once again sold off. That said, there are still 4 weeks left in the year so it is a little too early to say.

What is more interesting is last year the S&P closed at 2,058 and as I write this it is at 2,049 today. The US markets are almost dead flat on the year but it hasn't been a smooth ride below the surface. We had a stomach churning 10% drop to 1,890 back in late August but have since almost fully recovered.

Even more interesting is the lack of breadth. The top 10 stocks in the S&P 500 are up +14% this year (think stocks like Amazon, Google, Facebook, Netflix etc.). The other 490 are down -6%. Hmmmm. Stats like this give pause for concern. When a market weakens there are fewer and fewer participants. Think of a battle where fewer and fewer soldiers are still driving forward. The majority have started to retreat. It isn't clear yet if those in retreat will turn back around and rejoin the fray but if they don't, watch out. The leaders will eventually falter and then everyone will turn tail and run. You want to be out or at least well hedged by that point or you will get run over.

That said, in the meantime let's see if Santa can show up for the 13th year in a row. Have US investors been naughty or nice?

Mike Hayhoe, BSc, CIM® Branch Manager & Senior Investment Advisor | Independent Wealth Management Canaccord Genuity Wealth Management

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