TSX Venture Trader’s Secret


While major US indices fight to break even in 2015 during the final days of trading, the dramatic story this year was the capitulation of Canadian markets, brought about by the persistent bear market in commodities. The TSX is down approximately 10% year-to-date as oil producers continue to get clobbered by depressed WTI crude. This has brought down the entire Canadian economy, which was technically in a recession for half the year. The collapse in crude has also been blamed for record capital outflows from Canada in 2015 (click here to read our report on this subject). And once again, for the fifth consecutive year, the heavily resource weighted TSX Venture market is the continent’s worst performing index.

Approaching the five-year anniversary of the start of its epic bear market, the Venture managed to shed another 25% so far this calendar year. As of writing, the Venture index sits at 501.30 (just this past week the TSXV hit its all-time low of 494.28). Compare that to its peak (prior to the current bear market) in 2011 of roughly 2400 and you can clearly see the danger of an over-weighted index, or portfolio for that matter, in the resource sector.

In addition to the collapse in value, trading volume on the exchange has dropped off significantly, likely due to investor exhaustion within the resource sector.

TSX Venture Market concludes somber 2015

During my meetings with several financiers in both Vancouver and Calgary in recent months, I felt an uneasiness with the entire venture capital market in Western Canada. The overall industry mood on theTSX Venture is somber. Regrettably, it has been this way for practically all of 2015. But, there are peaks and troughs in every market. This particular trough has just lasted longer than most.

John Dobson, a mentor of mine who founded one of the most successful private funds in Canadian history and worked into his 80s, once told me that “misery loves company, and there are no rich pessimists.” So be careful who you spend time with.

TSX Venture Traders Should Be Optimistic

I want to show you one historical fact that should make every one of us optimistic about the TSX Venture precisely at this time of year. Historically, we are approaching the most advantageous time for trading within the Venture; and most investors aren’t even paying attention to this little-known fact:

  • Over the last twelve years, had you bought the TSX Venture index on December 22nd (give or take a day), you would have had the opportunity to sell within the next 60 days for a handsome and consistent profit. In fact, you would have had the opportunity to make a profit 100% of the time. It’s tough to beat those odds.

Take a look at the compelling chart below. It documents the potential return of the TSX Venture had you bought the index on any December 22nd (give or take a day) over the last twelve years and sold within a sixty-day period.

*approximate percentages

 

For the past 12 years, on average, the TSX Venture has increased approximately 12.3% within 60 days following December 22nd. In a third of those years, the highest level hit for the Venture during that 60-day period came in January (2008, 2010, 2013 and 2015), making the maximum potential profit for traders unusually quick…

The TSX Venture in 2015 and beyond…

The TSX Venture recently hit the lowest level of its existence. There’s blood in the streets. However, there is much to be optimistic about – most important is the fact that the Venture is actively looking to attract technology-related issuers. This is a prudent move for an exchange in desperate need of diversification. Many of its top performers in 2015 were technology-related plays after all.

So with today being December 20th, it may be wise to look for trading opportunities on this battered and beaten exchange given the historic and seasonally bullish stats I’ve laid out.

All the best with your trades this holiday season,

Aaron

PINNACLEDIGEST.COM

 

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This article represents solely the opinions of Aaron Hoddinott. Aaron Hoddinott is not an investment advisor and any reference to specific securities in the list referred to in the article does not constitute a recommendation thereof. THIS IS NOT INVESTMENT ADVICE. All statements in this report are to be checked and verified by the reader. Readers are encouraged to consult their investment advisors prior to making any investment decisions. The information in this article is of an impersonal nature and should not be construed as individualized advice or investment recommendations.

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