Evening Wrap: ASX 200 closes at record on surging resources stocks, led by massive gains in MinRes and lithium sector

It was a quiet end to an otherwise successful week for Aussie stocks. When I say quiet, I mean crickets chirping. 🦗 Today’s high-to-low trading range of 0.26% was the 25th smallest on record.

But, dig a little deeper, and there were some big moves – the biggest of which occurred in Aussie resources stocks. I suspect that if you’re holding a bunch those resources stocks there's likely to be a very big smile on your dial right now.

Of course, you knew China was going to announce all of those stimulus measures…right? That’s why you held on grimly in the face of those withering falls since May. Good for you!

Unfortunately, as it tends to be the case in the Aussie stock market, if resources are going up, there’s a very good chance a bunch of other stuff is going down to pay for it. Today, it was the usual Resources-alternative, Financials, but Property and Healthcare stocks also took a hit.

Click through/Scroll down for the usual reporting of the major sector and stock-specific moves, the broker responses to them, as well as all of the key upcoming economic data in tonight's Evening Wrap.

Also, I have detailed technical analysis on the S&P/ASX Resources Sector Index in today's ChartWatch (does this rally still have legs!? 🤔).

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 8.5 points higher at 8,212.2, 0.1% from its session low and 0.16% from its high. In the broader-based S&P/ASX 300 (XKO), advancers snuck ahead of decliners by a narrow 145 to 138. For the week, the XJO finished up 2.7 points or 0.03% higher, 1.24% from its intraweek low and just 0.16% from its intraweek high.

Resources stocks were just awesome today. The Materials (XMJ) (+2.8%) and the Resources (XJR) (+2.4%) each logged strong gains as the China stimulus buying and short covering continued (which contributed more I would love to know!). The turnaround in this sector has been astonishing, well at least it is for a lowly trend follower like me. This is how markets work, they trend, then news hits, they assess, they incorporate the news into prices, they trend. Rinse repeat.

The bigger the news – the bigger the impact – and the impact in the XJR is about 17% to the good in just three weeks. I have further analysis on the XJR in ChartWatch, below.

Also doing well today was Consumer Staples (XSJ) (+0.9%) as strong moves in The A2 Milk Company (ASX: A2M) (+8.9%) and Treasury Wine Estates (ASX: TWE) (+8.2%) more than accounted for losses in Endeavour Group (ASX: EDV) (-2.5%) and Elders (ASX: ELD) (-2.9%).

A2M went on a rollercoaster ride today, trading up nearly 18% before being put in a trading halt. No news since then, but usually when these sorts of shenanigans occur, it’s often a takeover. Media reports suggest that it might be A2M doing the taking over, however, which makes today’s move even more odd. No news on TWE or ELD, but EDV is losing its CEO.

Today's best performing ASX stocks

Paying for the excesses in Resources where two previously high flying sectors (that is, prior to this resources run) in Financials (XFJ) (-0.63%) and Real Estate Investment Trusts (XPJ) (-0.97%), and Health Care (XHJ) (-1.3%) which appears to be spiraling into an increasingly nasty (and concerning) downtrend on its chart.

Today's worst performing ASX stocks

ChartWatch

S&P/ASX 200 Resources Index (XJR)

A miracle...or more likely Chinese rather than divine intervention!

The last time we covered the XJR was in ChartWatch in the Evening Wrap on 18 September.

In that update, it had just touched the short term downtrend ribbon and logged a small but decidedly supply-side oriented black candle with an upward pointing shadow. We noted that three previous times since May, the price action had reversed sharply from the short term trend ribbon and subsequently taken out the previous low.

I left you with the notion that there was no reason the fourth time should be any different – it shouldn’t – but also that if it was going to be different you would see: “a solid higher trough, and preferably it occurs on some very strong (as in really strong) demand-side candles (i.e., white-bodied and or downward pointing shadows)”

So, whilst the contention that a fourth decline in line with the short and long term trends was most likely, I still left you with a roadmap to determine if it wasn’t going to be the case.

The chart above shows the XJR logged a strong demand-side candle that closed above the short term downtrend ribbon the very next candle (19 Sep). Then it pulled back to the bottom of the downward pointing shadow on 23 Sep – and that downward pointing shadow terminated smack-bang within the short term uptrend ribbon demonstrating it had transitioned to dynamic demand. The XRJ has logged near-perfect demand-side candles from there. Translation: It was a text-book short term trend reversal:

✅ Return to predominance of demand-side candles

✅ Return to higher peaks and higher troughs

✅ Close above the dynamic supply at the short term trend ribbon

✅ Short term trend ribbon transitions from acting as dynamic supply to acting as dynamic demand

That’s history. Here we are sitting well above the balance point (halfway point) of the May-Sep 6181-4887 decline. Add back dividends and we’re even further along. My experience suggests that moves as emphatic as this which push past the balance point have a better chance of retracing their entire decline.

Candles are good – plenty of long white demand-side showings there. The price action is exemplary – nothing shouts demand-side control more than long extensions and shallow pullbacks. Finally, to top it off, today’s candle closed above the long term downtrend ribbon.

It is unusual (through gritted teeth…frustrating) for trends to change so quickly. But they can. They do, erm, did. Certainly, there were some extenuating circumstances in this case (thank you Beijing!) – but these are not the domain of technical analysis! Moving on...

The technicals suggest the demand side is in control again here. The supply-side has evaporated. Poof!

Much like last time, I will acknowledge the current technicals, but also leave you with a roadmap for understanding how they might change. All continues to be good here until you see:

⏹️ Return to predominance of supply-side candles (i.e. black-bodied and or upward pointing shadows)

⏹️ Return to lower peaks and lower troughs

⏹️ Close below the dynamic demand at the short term trend ribbon

⏹️ Short term trend ribbon transitions from acting as dynamic demand to acting as dynamic supply

Technical analysis, my model, really is this simple. Check the boxes and get on with the job! 🧐

I have more technical analysis for you on ASX Resources themes, this time attempting to answer the question of whether the low in Lithium is in.

Economy

Today

• There weren't any major data releases in our time zone today

Later this week

Friday

• 22:30 USA Core PCE Price Index August (+0.2% m/m forecast to +2.6% p.a. vs +0.2% m/m to +2.6% p.a. July)

• 22:30 USA Personal Income & Personal Spending August (+0.4% m/m forecast vs +0.3% m/m July & +0.3% m/m forecast vs +0.5% m/m July)

Latest News

Interesting Movers

Trading higher

• +13.1% Mineral Resources (MIN) - No news, panicked short covering post China stimulus news, possibly something to do with Change in substantial holding (State Street is a rumoured active short seller).

• +8.9% The A2 Milk Company (A2M) - Trading Halt, media reports suggest company is about to make a major acquisition.

• +8.3% Treasury Wine Estates (TWE) - No news, closed back above long term trend ribbon 🔎📈.

• +8.2% Champion Iron (CIA) - No news, ditto China stimulus panic buying/short covering.

• +7.5% Alcoa Corporation (AAI) - Form SD 2023 Resource Extraction Payment Report, and plenty of ditto China stimulus.

• +6.9% Liontown Resources (LTR) - Liontown releases full-year 2024 results, but also, lithium minerals prices are rising in China today, but much of this move likely a follow on from big gains in US counterparts overnight. Check this article for full lithium sector technical analysis.

• +6.7% Pilbara Minerals (PLS) - Ditto lithium.

• +6.1% Arcadium Lithium (LTM) - ARCADIUM LITHIUM PLC FORM SD, ditto lithium.

• +6.1% Latin Resources (LRS) - Ditto lithium.

• +5.6% Tabcorp (TAH) - No news.

• +5.6% Siteminder (SDR) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +5.4% IGO (IGO) - Ditto lithium.

• +5.2% Develop Global (DVP) - Annual Report to shareholders, ditto lithium.

• +5.2% Neuren Pharmaceuticals (NEU) - No news.

• +5.1% Vulcan Energy Resources (VUL) - Financing Progress Update, ditto lithium.

• +4.8% Fortescue (FMG) - Ditto China stimulus.

• +4.4% South32 (S32) - Ditto China stimulus.

Trading lower

• -43.9% The Star Entertainment Group (SGR) - Media Release - Unaudited Results & Business Update and Appendix 4E & Unaudited Preliminary Financial Report and Investor Presentation, fall is consistent with prevailing short and long term downtrends 🔎📉.

• -5.6% Fletcher Building (FBU) - Moodys affirms FBU Baa3 ratings - changes outlook to stable, fall is consistent with prevailing short and long term downtrends 🔎📉.

• -5.4% Ora Banda Mining (OBM) - Extension to Repayment of Loan Agreement.

• -4.6% Westgold Resources (WGX) - Becoming a substantial holder (State Street is a rumoured active short seller).

• -4.6% Spartan Resources (SPR) - No news.

• -4.4% Karoon Energy (KAR) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉.

Broker Notes

• Brickworks (BKW)

  • Downgraded to hold from buy at Bell Potter; Price Target: $31.00 from $29.00

  • Retained at buy at Citi; Price Target: $36.60 from $37.50

  • Retained at neutral at Macquarie; Price Target: $27.40 from $27.30

  • Upgraded to accumulate from hold at Ord Minnett; Price Target: $31.00 from $27.00

• Comet Ridge (COI)

  • Retained at buy at Morgans; Price Target: $0.23 from $0.28

• Lendlease Group (LLC)

  • Retained at buy at Citi; Price Target: $7.10

  • Retained at equal-weight at Morgan Stanley; Price Target: $6.35

• NIB (NHF)

  • Retained at buy at Ord Minnett; Price Target: $7.25

• Pointsbet (PBH)

  • Downgraded to hold from buy at Bell Potter; Price Target: $0.77 from $0.66

• Premier Investments (PMV)

  • Retained at buy at Bell Potter; Price Target: $34.00 from $37.00

  • Retained at neutral at Macquarie; Price Target: $31.90 from $33.50

• Stockland (SGP)

  • Retained at buy at Citi; Price Target: $5.30

  • Retained at overweight at Morgan Stanley; Price Target: $5.30

• Southern Cross Gold (SXG)

  • Retained at buy at Shaw and Partners; Price Target: $3.26

• Viridis Mining and Minerals (VMM)

  • Retained at hold at Ord Minnett; Price Target: $1.00

• Westpac Banking Corporation (WBC)

  • Retained at hold at CLSA; Price Target: $30.40

  • Retained at underweight at JP Morgan; Price Target: $25.80

  • Retained at underperform at Macquarie; Price Target: $26.00

  • Retained at equal-weight at Morgan Stanley; Price Target: $29.70

• Webjet (WEB)

  • Downgraded to overweight from buy at Jarden; Price Target: $7.70 from $9.45

• Whitehaven Coal (WHC)

  • Upgraded to buy from neutral at Citi; Price Target: $7.60 from $8.30

• Webjet (WJL)

  • Initiated at overweight at Jarden; Price Target: $1.10

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