Resource World Magazine

A U G U S T / S E P T E M B E R 2 0 1 8 www.resourceworld.com 23 At the Market by Rodney Blake Market Bottom Indicators I n my last column (Volume 16 issue 4), I wrote about indicators of an equity market top. So, by natural extension for this issue, I thought I'd focus on indi- cators of equity market bottoms. Market bottoms, especially those in the resource sector, tend to be long drawn-out painful affairs. I assume this is because the down years for resource prices tend to be much longer that the good times of rising prices. That said, some of the signs of market bot- toms that I watch for are: Light Volumes – Market bottoms are usually predicated with light trading vol- umes over a series of months and are a true indicator of investor lack of interest. For example, the TSX Venture Exchange, mired at a multi-year low of just over 700, is currently trading about 130,000,000 shares a day. The same exchange at the start of the year was putting through over 400,000,000 shares a day as it powered up to a new three-year high of 940. News releases that seem to disappear into a void – Nothing is more frustrating than watching a positive news release go seemingly unnoticed or worse yet, create a wave of selling. The lack of interest is indic- ative of a market bottom and the selling is usually from investors who own the stock at higher prices that use the buying created by the news release, to sell positions they bought during the last bull market. Flush Selling – occurs when large sell orders seem to fill most of the underly- ing bids of a stock. This may be a tax loss maneuver but more often than not it comes from investors that have lost all hope in the company or they just can't stand to look at the position anymore. They then sell the whole thing at one time to finally get it off their statements. Out of sight and out of mind. The classic example of amateur investor "buy high and sell low". Record Low Index – This might seem obvious, but I'm often surprised that clients fail to know the value of the underlying index or sector in which their investments trade. The value of an index may not fully reflect the value of a secu- rity, but one trading in a positive index is bound to get a better look than one trad- ing in an index that keeps setting new lows. For example, as I write this – the tech-laden NASDAQ continues to hit new all-time highs above 7,850 while the TSX Venture Exchange is trading near a new 1½-year low of 710. By extension, tech stocks in general are trading at higher val- uations than resource issues. Market pundits second guess man- agement – Unlike the benefit-of-the-doubt shown to management decisions of compa- nies in bull markets (think Amazon.com or Tesla), corporate decisions made by compa- nies in bear markets routinely get second guessed by analysts and media alike (think BlackBerry and Bombardier). In a bad mar- ket everyone seems to have a better idea than those who run the companies. Market bottoms can be lengthy and fiscally painful affairs, but they do eventu- ally become the next bull market. Let the indicators be your guide. n Rodney Blake is an Investment Advisors with Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp, Member- Canadian Investor Protection Fund. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Rodney Blake, Canaccord Genuity Corp, or its subsid- iaries, or affiliated companies, assume any liability. This information is current as of the date appearing in this article, we do not assume any obligation to update the information or advise on further developments relating to these securities. This article should not be considered personal investment advice or a solicitation to buy or sell securities. Canaccord Genuity and holdings of its respective directors, officers and employees and their associations, from time to time may buy or sell any securities mentioned herein. The views expressed are those of the author and not necessarily those of Canaccord Genuity Corp. He can be reached at 604-643- 7567 or rod.blake@canaccord.com

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