Issue link: http://resourceworld.uberflip.com/i/1058321
D E C E M B E R / J A N U A R Y 2 0 1 9 www.resourceworld.com 41 2 018 was not a good year for resource stocks – and as represented by their best indicator, the TSX Venture Exchange, I would call 2018 a resource market momentum failure. In technical terms – a momentum failure happens when a particular market that is poised for a move higher – somehow fails and in some cases even reverses the anticipated move. In 2018, the TSX Venture Exchange failed in spades. To get a better grasp this – take a look at the chart on page 9 and follow along. After basing at about the 750 level in early July of last year, the Venture formed a nice ascending base for the rest of year and looked to have a good start to 2018. And so it did as fresh money came into the market with the usual New Year's rally and encouraged by generally improving resource prices that drove the Venture up to the 940 level by mid-January. But then, after a toppy two-weeks, the Venture tur- tled and suddenly plunged by 100-points in early February to the 825 level and from there drifted lower and lower until – as I write this in late November – it set a new low for the year of 587 – a complete momentum failure. So how does this happen? How does a sector that looked like it wanted to move higher, suddenly turn from a 3½ -year high and drop all the way down to 2½ -year low in just 10 months? Some say that the price of gold not reaching new highs caused the failure. Some say it was the continued investor rush into the crypto currency and marijuana stocks that just drained any enthusiasm for the resource sector. All in all, it was probably a com- bination of many things; but rest assured, the year was mostly lost. Currently, the Venture Exchange is suf- fering from a long overdue dose of reality from the mostly overbought marijuana sec- tor, as well as the start of the annual tax loss selling season. The combination seems to have the index at or near an exhaustion level. Somewhere between now and the end of the year, the tax loss season will end, and the usual optimism of the New Year will once again prevail. Should that happen, then this mar- ket could be a multi-year buy. A fun fact about a momentum failure is that when the previous underlying bullish trend re-estab- lishes itself, the move is usually enhanced by the momentum of the failure. That is – if the Venture once again becomes bullish going into the New Year – the move will try to quickly recapture the loss of this year and then move higher from there as if the loss of 2018 never happened. The TSX Venture Exchange for 2018 – a momentum failure – but with a ray of hope. 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 The 2018 TSX Venture Exchange – a momentum failure At the Market by Rodney Blake continued on page 77