Some months ago one of my columns illustrated an inverse head-and shoulders formation forming around WTI oil and suggested that this would  create opportunities to make money in the oil sector, which had been in the doldrums for a couple of years. Other articles suggested other ways to play the turnaround, all of which worked – after all, a rising tide lifts all ships. Take a look at the chart of the S&P’s Energy spyder (XLE). In this chart too, you can see the inverted head-and-shoulders pattern on the left.

The most interesting plays of all, though, were Halliburton (HAL), Nabors Industries (NBR) and Precision Drilling (PDS), which I haven’t previously mentioned in a column. The reason these service sector companies are so interesting is that they tend to lead the petroleum industry in making money. After all, when the petroleum industry begins to do well, they start drilling wells and installing pipe and gathering lines. For this, they need to hire service sector companies. Competition for contracts ensues, and the service providers get more generously rewarded for their efforts. That pattern is now beginning to play out.

But what is really important about the present season is that it typically comes with a Santa Claus rally – the surge in stock prices that typically occurs in the week between Christmas and New Year's Day. The upswing typically starts gently but then accelerates sharply in the second half of the month. It tends to be the strongest fortnight of the year.

Although many in western Europe have the strange idea that Santa lives in Finland, North Americans know that he and the elves actually live in Canada’s north.

This year, in my view, he will be particularly good to Canadian investors. More importantly, in my view, the rally will continue into next year. This will take the TSE 60 index to a new record high – and next year will see more new highs in this country.

There are several reasons for this. One is that Canada’s stock market disproportionately reflects the impact of oil and gas stocks, the service sector and pipelines.  And last week those sectors got a triple shot in the arm. One was government approval to expand a pipeline to British Columbia, whence oil could be exported by tanker around the world; the second was approval to double the capacity of the Trans Mountain Pipeline – Canada’s most important oil export conduit – to Wisconsin; the third was a decision by OPEC to reduce production by one percent. As the chart at the beginning of this column notes, those moves so close together are beginning to have a powerful impact on the S&P.

In addition to these petroleum-related developments, a couple of free-trade developments are likely to affect Canada in a positive way. One is that, effective January 1st, the biggest such deal in history takes effect. Known as CETA (the Comprehensive Economic and Trade Agreement), it gives Canada almost unfettered access to European markets. In return, Europe gets almost unfettered access to Canadian exports. President-elect Trump’s rants to the contrary notwithstanding, greater trade builds greater wealth. For Canada, CETA means greater wealth.

Also, there is the matter of the existing free-trade agreement with the Americans. Trump says he will kill such agreements as the Trans Pacific Partnership by executive order, and he can do so. It’s unlikely that he will kill the agreement with Canada, however, and our federal government is planning to make nice with him. Call me naïve, but I think our huge trade with the US will not much change. (Call me really naïve, but ditto for Mexico.)

And that takes me to this column’s key chart, above. EWC is an ETF of Canadian stocks trading in New York. It holds 93 companies, weighted toward Canadian banks, railways and energy companies, and its assets are worth more than US$3 billion. Leading up to the Santa Claus rally, we are seeing a breakout on high volume. Next year will be dynamite for Canada, and likely for this ETF.