TSX Venture Trades to New 2019 Highs
The TSX Venture is at its highest levels of 2019. Despite still being down huge from its 52-week high of 840 from 2018, the Venture is building momentum, trading to a high of 637.62 Tuesday.
The Venture’s current breakout becomes more visible when viewing a one month chart.
So, what is leading the Venture higher? Two things: marijuana stocks and a firming up of commodity prices.
Let’s first look at cannabis stocks, which are back on a roll. The Canadian Marijuana Index was gapping up again Tuesday, rising 2.5% to 712.74. The CMI is in a full-on bull market as investors continue pouring into the space.
Canadian Marijuana Index Soars Above 700
Marijuana stocks are always one strategic investment away from a bump higher. Aurora Cannabis is leading this cycle after news billionaire hedge-fund manager Nelson Peltz was granted options to purchase 19.9 million common shares in the company at C$10.34 per share. According to MarketWatch, he will act “as an adviser with the aim of sealing new cooperation agreements and expanding globally.”
Another catalyst was Hexo Corp. (HEXO: TSX) announcing it would acquire smaller rival Newstrike Brands in an all-stock deal. Hexo’s market cap was flirting with $2 billion Tuesday.
Villamayor Capital writing at Seeking Alpha reports,
“In the announcement of the acquisition of Newstrike Brands (OTCPK: NWKRF), the management of HEXO Corp. (HEXO) reported that the resulting company could make a net revenue of $400 million in 2020.”
These types of deals and large numbers affect investor psyche and lead to a surge in buying.
Now, let’s look at the commodity space. The old bread and butter of the TSX Venture, has been about as sexy as your Grandma in your girlfriend’s underwear the past few years.
While the trend is by no means set, a basing seems underway, and commodity ETFs across the world are rising.
iShares GSCI Commodity-Indexed Trust Fund (GSG) – 6 Month Chart
The Metals & Minerals Price Index perhaps best tracks and reflects the performance of the Venture. At a current level of 80.12, the index is up from 75.77 last month. While still down about 9% from last year, its up 6% since last month.
Metals & Minerals Price Index
The red circle above is from January of 2018; likewise, the TSX Venture also saw a prominent top in January of 2018, near 900.
If the Metals & Minerals Price Index breaks through its January 2018 highs of around 88, I would expect the TSX Venture to run higher with it.
Despite the epic mining bear market which began in late 2011 or early 2012, depending on how you measure it, the underlying value of metals and minerals is increasing. In fact, the M&M Price Index bottomed in January of 2016, exactly when the TSX Venture bottomed at 466.
Certainly, for an exchange still heavily weighted (more than 50%) to the mining sector any continued move higher in the M&M Price Index will be exceedingly bullish. Marijuana stocks remain a white-hot niche sector and cannot move the entire exchange the way mining can.