Advanced Notice on Potential TSX Venture Upswing

Dear member,

For more than a decade the best time of year to buy juniors which trade on the TSX Venture has been around December 22nd, give or take a day.

Buying the TSX Venture index on the 22nd, for the past eleven years, has been virtually the perfect moment as you would have had the opportunity to make money 100% of the time at some point within the proceeding 60 days. In fact, the average peak gain starting on December 22nd through February 22nd is roughly 13%, for the past eleven years.

In 2014, the Venture rallied roughly 15% from December 22, 2013 to February 22nd, 2014. Prior to that rally, I wrote about this phenomenal seasonality factor - you can read my article here.

From my research, another seasonally bullish time of year to buy the TSX Venture index is quickly approaching.

As investors dump their stocks in tandem this month, similar in fashion to tax loss selling season in December, an opportune moment for Venture investors and traders is forthcoming. The proverbial sell in May and go away lemming-mentality has hit the general market. But, as history suggests, that sentiment is the wrong one to have if you are investing in TSX Venture plays.

Historically, it is best to sell the Venture in late-March, and spend April and May researching for quality names to buy in June, as they will likely be discounted significantly at that moment in time.

The success ratio of buying the Venture in June, particularly the latter half of the month (between the 20th and 25th), and selling before the end of November, has proven to be a prudent trading strategy for investors. In fact, had you bought the index in late June for the past eleven years, you would have had the opportunity to make a profit within that 5 month stretch in all but one year. That one year, of course, was 2008, when we saw the worst market crash since the Great Depression.

Below is a graph documenting the performance of the TSX Venture index for the past 11 years, from late June until late November. Take note that in 2007 and 2011 the chart shows a loss for the Venture from late-June to late-November. That is accurate when only measuring point A to point B. However, had you bought the index in late June of both those years, you would have had the opportunity to sell for roughly a 4% and 4.5% gain just a month later, in late July.

Over the last eleven years, the average gain on the TSX Venture from late June until late November is roughly 5%. While the average return is not as high as the late December through late February period, historically it is still a great time to invest some risk capital in this market.

After all, it's about risk/reward.

One could have made a profit buying the Venture index in late June and selling within 5 months roughly 90% of the time over the last 11 years... personally, I like those odds. What's more, over the past eleven years, the Venture has been in bear market territory for just over 4 years. It hasn't exactly been an easy market to make money in over the last eleven years. That makes these statistics even more impressive from my perspective.

One thing to keep in mind when trying to time the market is that typically 80% of the rally occurs within a ten day period. Having constant exposure during seasonally strong periods, documented above, is a solid strategy.

With so much uncertainty in the global economy, and geopolitical turmoil brewing, it is wise, particularly when dealing with juniors, to have a trader's mentality. Anyone who says they know what the global economy is going to look like one year from now is full of it. As such, now is not the time to get greedy and a short to medium-term outlook (3 to 6 months) is what I'm focused on.

All the best with your investments,

Aaron

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