There’s no doubt that Canada’s pot stocks like Canopy Growth Corp. (Quote, Chart TSX:WEED, NYSE:CGC) are hot right now, but for how long will the good times last?

Some are predicting mid-October as a potential turning point when the rubber hits the road and cannabis companies have to make good on their until now untested production numbers. Maybe, but more likely the peak for pot stocks will happen when investor sentiment in the overall market starts to turn negative, says Jon Vialoux, associate portfolio manager and seasonal analyst for Castlemoore Inc.

It’s been a heck of a few weeks for public marijuana companies in Canada, as virtually all of them have posted huge gains since mid-August. After months of sideways trading, the sector really took off once news broke that beer and alcohol giant Constellation Brands was upping its stake in industry leader Canopy Growth. That move was greeted by the markets as proof positive that cannabis is going to be a big deal, not just in Canada where rec pot becomes legal on October 17 but in a growing group of US states and, further afield, countries like Germany and Australia who appear to be on the road to legalization.

All that has meant double-digit gains for many stocks in the sector, as seen in the Canadian Marijuana Index which tracks the leading cannabis stocks. The index has shot up 269 points since August 14, a 60 per cent rise in three weeks. Canopy Growth, whose share price has now far eclipsed its January high when investing in the sector as a whole reached a feverish pace, is up another eight per cent in midday trading on Tuesday.

The run may continue for a while yet, but as Vialoux points out, when it comes to the more risky investment sectors like cannabis and cryptocurrencies, overall market sentiment is going to be a determining factor.

Vialoux spoke to BNN Bloomberg on Canopy’s outlook, saying, “We’re seeing this trend of higher highs, higher lows. It’s breaking out to new highs. It’s obviously gone parabolic on this Constellation Brands news, so the trend is in your favour,” he says.

“But talking about risk sentiment in general, when you have broader equity markets pushing all-time highs, it’s no surprise that you’re seeing risk sentiment spill over into marijuana stocks and even bitcoin,” Vialoux says. “Remember, all of these things peaked — broader equity markets, marijuana stocks, bitcoin — all around the same time in January. So risk sentiment was very high in January and it all stripped off rather quickly. The broader market sold off, these marijuana stocks sold off, bitcoin, well, it’s notorious that it sold off.”

Bitcoin reached its peak of US$19,343 on December 16 but fell to less than half that value by early February, staying more or less in the US$7,000 range since. The cryptocurrency hit a low of US$6,143 as recently as August 10 but has lately been on an upswing, indicative of the broader market sentiment, says Vialoux.

“We’re seeing equity markets push off to new highs, weed stocks are obviously growing, and even in bitcoin the momentum is growing,” he says. “You’re seeing this positive risk sentiment spill into all of the obscure asset classes. As long as that positive risk sentiment remains in play, it’s off to the races.”