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In mid-June, I documented the intra-year seasonality of
the Toronto Venture Exchange (TSXV) over its plus 14-year history (Mercenary Musing, June 13, 2016).
This venture capital market is dominated by nano-cap
resource exploration companies with a few small miners in the mix. Of 1682
current listings, 985 (59%) are classified as �mining� companies. In
actuality, the vast majority are mineral explorers; few actually mine
anything other than the stock market. Energy companies comprise 10% of the
listings. Minor sectors include diversified industries, technology, life
sciences, real estate, clean technology, and �capital pool companies�, i.e.,
shells with no project.
The Toronto Venture Exchange Index is a weighted average
of about 400 of the largest companies and serves as a proxy for performance
of the overall market.
In a series of normalized charts, we will show there are
predictable patterns for the TSXV Index from mid Q4 of any given year thru
January of the following year. Then I will illustrate how these patterns can
be used to trading advantage before and after the new year.
Here is the record of the TSXV Index from 2002 to
present:
Over a history approaching 15 years, the Venture Index
has exhibited significant volatility. Its rises and falls broadly correspond
to bull and bear markets for gold but are much more pronounced:
 
The following series of four charts shows
the percentage change in the daily value of the TSXV Index normalized from
November 1 to January 31 for each year:
This composite TSXV Index chart shows the percentage
change from November 1 to January 31 over 14 years:
In the next two charts, we have separated the November 1
to January 31 composites into bull and bear markets based upon overall TSXV
performance for that year. Note the significant increase in data ranges at
+18% and -13% versus the composite case presented above at about 8%:
These composite charts illustrate prominent mid Q4 to
early Q1 seasonal trends for the Toronto Venture Exchange Index. Note that
each month has 20-21 trading days in any given year.
�The composite Index chart shows a slight uptick during
the first week in November then a downturn until mid-month followed by an
uptick until month�s end. There is no net gain or loss for the month.
�Overall, there is a downtrend from early to mid-December
when the Index hits its seasonal low.
�The bull and bear Index composites are diametrically
opposed over this period. In bull years, the Index ticks upward thru the
first week of December then falls off during mid-month. In bear years, it
falls unabated from the beginning of November thru mid-December.
�In all three cases, there is a very strong uptick from
the middle of December that continues thru the opening sessions of the new
year.
�The Index is then flat until the end of January for the
14-year composite and the bear market years. It exhibits a slight rise in
bull years.
Let�s explore some factors that can account for the
well-defined seasonal trends from November 1 to January 31 for the Toronto
Venture Exchange Index:
�In all cases there is a dip in mid-November that I
attribute to front-running by savvy speculators generating tax-loss sales.
�The peak of tax-loss selling is evident in all cases
with significant market downturns and seasonal lows during the third week of
December.
�Regardless of overall, bull, or bear market conditions,
there is a strong uptick thru beginning of the new year as speculators
bargain hunt for oversold but fundamentally-strong stocks.
�After the opening market days in early January, the TSXV
market remains directionless for the remainder of the month despite generally
stronger gold prices that I documented in a previous effort (Mercenary Musing, November 23, 2015).
In addition, many nano-cap resource juniors are raising
money for the coming year�s activities and promoting at the Vancouver
Resource Investment Conference in late January. However, it appears there is
little reaction to these efforts.
I established in an early summer musing that junior
resource companies trade in well-defined cycles and therefore, present
periodic entry and exit points that can be exploited for profit.
Our research indicates there is pronounced tax-loss
seasonality in the Toronto Venture Exchange Index over the past 14 years
regardless of market conditions.
Tax-loss sales peak and the market reaches a seasonal low
in mid-December. For contrarian speculators, this is the ideal time to
accumulate low-priced positions in good companies or to average down for
existing holdings.
The patterns also indicate that savvy traders can
generate incremental profits by buying oversold companies in mid-December and
selling them in early January.
I trust this provides insight into the timing of trades
in the junior resource sector during tax-loss season.
The above trends present short-term opportunities for
speculative trading, accumulating positions, or averaging down of core
holdings. That said, caution is always advised and this is especially so in
bear markets. Institutional newsletter guru Bill King�s comments during the
global economic crisis of 2008-2009 merit consideration:
More money is lost by investors averaging down in bear
markets than at any other time.
With this caveat, may all your tax-loss season buys be to
the upside.
Ciao for now,
Mickey Fulp
Mercenary Geologist
Acknowledgment: Troy
McIntyre is the new research assistant for MercenaryGeologist.com.
The Mercenary Geologist Michael S. �Mickey�
Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of
Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 35
years experience as an exploration geologist and analyst searching for
economic deposits of base and precious metals, industrial minerals, uranium,
coal, oil and gas, and water in North and South America, Europe, and Asia.
Mickey worked for junior explorers, major mining companies,
private companies, and investors as a consulting economic geologist for over
20 years, specializing in geological mapping, property evaluation, and
business development.In addition to Mickey�s professional credentials and
experience, he is high-altitude proficient, and is bilingual in English and
Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru,
Nevada, Chile, and British Columbia.
Mickey is well-known and highly respected throughout the
mining and exploration community due to his ongoing work as an analyst,
writer, and speaker.
Contact: Contact@MercenaryGeologist.com
Disclaimer and Notice: I
am not a certified financial analyst, broker, or professional qualified to
offer investment advice. Nothing in any report, commentary, this website,
interview, and other content constitutes or can be construed as investment
advice or an offer or solicitation or advice to buy or sell stock or any
asset or investment. All of my presentations should be considered an opinion
and my opinions may be based upon information obtained from research of
public documents and content available on the company�s website, regulatory
filings, various stock exchange websites, and stock information services,
through discussions with company representatives, agents, other professionals
and investors, and field visits. My opinions are based upon information
believed to be accurate and reliable, but my opinions are not guaranteed or
implied to be so. The opinions presented may not be complete or correct; all
information is provided without any legal responsibility or obligation to
provide future updates. I accept no responsibility and no liability,
whatsoever, for any direct, indirect, special, punitive, or consequential
damages or loss arising from the use of my opinions or information. The
information contained in a report, commentary, this website, interview, and
other content is subject to change without notice, may become outdated, and
may not be updated. A report, commentary, this website, interview, and other
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