Evening Wrap: ASX 200 dips as defensives rule, slide in lithium, uranium, and coal stocks continues

So often over the last few weeks, we’ve seen most sectors up or most sectors down during a session.

Today, 5 of the 11 major sectors were up, and 6 were down. This lack of decisiveness, the small daily trading range, and general lack of news and moves even at a stock level – speaks of an overwhelming malaise among investors in Aussie stocks.

Possibly, with key commodity prices on the decline, international investors are looking elsewhere. Their selling is possibly too much for the general ebb of demand from local passive super funds.

Or it’s just a case of let’s wait and see.

If you thought last week was a big one with respect to major economic data pressure points (Aussie employment, US CPI, and a Fed meeting), this week makes last week look like kindergarten.

Today’s malaise might be the norm until we get past three central bank meetings (our own RBA’s included), a deluge of global manufacturing and services data, and data on US retail sales and housing market.

But for a description of exactly how the paint dried today on the ASX…

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 24 points lower at 7,700.3, 0.39% from its session high and just 0.03% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 102 to 170.

The Communication Services (XTJ) (+0.68%) sector was the best performing sector today, likely in response to a 1.4% gain in major constituent Telstra Group (ASX: TLS). But like the rest of the market, this sector was also split roughly between winners and losers.

Telstra is generally appreciated for its defensive properties. So, when we look at the next four sectors that logged gains today, it’s interesting to see a clear defensive tone there also. Health Care (XHJ) (+0.38%), Financials (XFJ) (+0.30%), and Consumer Staples (XSJ) (+0.21%) weren’t far behind the XTJ.

If you’ve suffered through any of my recent evening wraps, this would stand out to you, because we have been noting a growing tendency towards defensive sectors of late.

We’ve also noted a rampaging trend, or rather a downtrend, associated with commodities stocks, particularly those in the Energy (XEJ) (-1.5%) and Resources (XJR) (-1.2%) sectors. Extending their losses today, were mainly lithium and uranium stocks, but looking at the table below, it was a mash up of several possible boom and bust themes.

A mash up of boom and bust themes across the Energy and Resources sectors today.

ChartWatch

S&P/ASX 200 (XJO)

Biding time, but for what!?

The last time we covered the XJO was in ChartWatch in the Evening Wrap on 11 June.

Just a quick one here, as there hasn't been a massive change from our last update – but I feel it’s important to set us up with key levels for the week.

And those levels are pretty straightforward: Supply = 7862-7911 vs Demand = 7489-7601.

Just as straightforward is the two possible scenarios that could occur following a break out or break down of the current growing trading range: Close > 7911 = Next leg up vs Close < 7489 equals pain – loads of pain!

Until then, we are very much stuck in the middle, but today's candle possibly tips the balance ever so slightly towards scenario 2! 😨

Iron Ore 62% CFR China Futures (SGX)

Supply side appears still in control

The last time we covered iron ore was in ChartWatch in the Evening Wrap on 4 June.

At that time, we observed a string of black, demand-side candles which I described as a “wall of supply”.

As expected, iron ore has continued to probe lower points of demand with the exception of a failed rally in the 7 June candle – the long upward shadow of which delivered further proof of the prevailing supply-side control.

The short term trend has transitioned to down, and as per the top of the shadow of the 7 June candle, is providing dynamic supply. The long term trend has reverted to down.

The price action is falling peaks and falling troughs, and candle are predominantly supply-side (i.e. black-bodied and or upward pointing shadows).

Friday’s peak at 109 suggests the 109.25-111.95 demand zone is now supply. 114 is the next key point of demand above that.

Demand is 103.50, and below that, 94.00-99.20. A close below 103.50 would likely facilitate a probe of 94-99.20. A break of that, well that’s the nuclear scenario for iron ore.

How will you know demand has ridden back in to overwhelm supply? I suggest not until a close above the long term downtrend ribbon (currently circa 116), or at the very least before then – a return to rising peaks and rising troughs or a substantial showing of demand-side candles (i.e., white-bodied and or downward pointing shadows).

Economy

Today

• CHINA Data dump for May

  • Industrial Production y/y +5.6% p.a. vs +6.2% p.a. forecast and 6.7% p.a. in April 👎

  • Retail Sales y/y +3.7% p.a. vs +3.0% p.a. forecast and 2.3% p.a. in April 👍

  • Fixed Asset Investment ytd/y +4.0% p.a. vs 4.2% p.a. forecast and 4.2% p.a. in April 👎

  • Unemployment Rate 5% vs 5% forecast and 5% in April ⚖️

Later this week

Tuesday

• 14:30 AUS RBA Meeting, Cash Rate Announcement, Press Conference 00:30 (no change vs 4.35% previous)

• 22:30 USA Core Retail Sales May (+0.2% m/m forecast vs +0.2% in April)

Wednesday

• 00:00 USA non-trading day due to observance of Juneteenth

Thursday

• 20:00 UK Monetary Policy Summary & Official Bank Rate (no change vs 5.25% previous)

Friday

• 17:15 EUR/UK French, German, Eurozone, & UK flash PMIs

• 23:45 USA Flash Manufacturing PMI May (forecast 51 vs 51.3 in April) & Flash Services PMI May (forecast 53.4 vs 54.8 in April)

Saturday

• 00:00 USA Existing Home Sales May (4.08M forecast vs 4.14M in April)

Latest News

Interesting Movers

Trading higher

• +9.2% Wildcat Resources (WC8) - No news, bucked the trend wrt ASX lithium stocks! 🤔

• +4.7% Jumbo Interactive (JIN) - No news, rise is consistent with prevailing long term uptrend, bounced off long term uptrend ribbon, closed above short term uptrend ribbon 🔎📈

• +4.5% Capricorn Metals (CMM) - Possibly Friday's Partial Closure of Hedge Book Gives CMM Gold Price Upside

• +4.3% Sigma Healthcare (SIG) - 2 x Becoming a substantial holder from CGF notices (and Becoming a substantial holder), continued rebound after Thursday's Sigma Acknowledges ACCC Announcement, rise is consistent with prevailing long term uptrend, bounced off long term uptrend ribbon 🔎📈

• +3.6% Telix Pharmaceuticals (TLX) - Continued positive response to Friday's Telix Elects to Withdraw from Proposed U.S. Listing, with prevailing short and long term uptrends 🔎📈

• +2.8% Nanosonics (NAN) - Becoming a substantial holder notice

• +2.5% Life360 Inc. (360) - Exercise of over-allotment option, rise is consistent with prevailing long term uptrend, bounced off long term uptrend ribbon, closed above short term uptrend ribbon 🔎📈

• +2.4% ASX (ASX) - Upgraded to equal-weight from underweight at Morgan Stanley and price target increased to $54.65 from $53.50

• +2.2% Red 5 (RED) - No news, initiated at outperform at Macquarie with a price target of $0.50, rise is consistent with prevailing short and long term uptrends 🔎📈

Trading lower

• -7.8% Vulcan Energy Resources (VUL) - No news, succumbing to general weakness in broader ASX lithium sector, lithium minerals prices down again in China today, closed below short term trend ribbon 🔎📉

• -7.7% Lotus Resources (LOT) - No news, succumbing to general weakness in broader uranium sector, fall is consistent with short term downtrend, closed within long term uptrend ribbon 🔎📉

• -6.1% Arcadium Lithium (LTM) - No news, meltdown in ASX lithium stocks continues, fall is consistent with prevailing short and long term downtrends 🔎📉

• -5.5% Bannerman Energy (BMN) - No news, continued general weakness in ASX uranium sector, fall is consistent with prevailing short term downtrend, falling peaks and falling troughs, predominance of black candles 🔎📉

• -5.2% Chalice Mining (CHN) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• -4.9% Paladin Energy (PDN) - No news, continued general weakness in ASX uranium sector, fall is consistent with prevailing short term downtrend, falling peaks and falling troughs, predominance of black candles 🔎📉

• -4.4% Seven Group (SVW) - No news, closed below short term trend ribbon 🔎📉

• -4.3% Integral Diagnostics (IDX) - Integral Diagnostics & Capitol Health Proposed Merger

• -4.1% Wisetech Global (WTC) - Change of Director's Interest Notice (Richard White sales), closed below short term trend ribbon 🔎📉

• -3.9% Myer (MYR) - No news, fall is consistent with prevailing short downtrend, long term trend is transitioning from up to down 🔎📉

• -3.9% Resolute Mining (RSG) - No news, closed below short term trend ribbon 🔎📉

• -3.9% The A2 Milk Company (A2M) - No news, closed below short term trend ribbon 🔎📉

• -3.8% Liontown Resources (LTR) - No news, meltdown in ASX lithium stocks continues, fall is consistent with prevailing short and long term downtrends 🔎📉

• -3.1% Boss Energy (BOE) - No news, continued general weakness in ASX uranium sector, fall is consistent with prevailing short term downtrend, falling peaks and falling troughs, predominance of black candles, long term trend is transitioning from up to down 🔎📉

Broker Notes

• AGL Energy (AGL)

  • Retained at equal-weight at Morgan Stanley; Price Target: $10.00 from $9.50

• ANZ Group (ANZ)

  • Retained at sell at Citi; Price Target: $24.50

• Abacus Storage King (ASK)

  • Retained at buy at Shaw and Partners; Price Target: $1.30

• ASX (ASX)

  • Upgraded to equal-weight from underweight at Morgan Stanley; Price Target: $54.65 from $53.50

• BHP Group (BHP)

  • Retained at buy at Citi; Price Target: $48.50

  • Retained at equal-weight at Morgan Stanley; Price Target: $46.75

• Beach Energy (BPT)

  • Retained at buy at Bell Potter; Price Target: $1.80

• Bluescope Steel (BSL)

  • Downgraded to underperform from hold at Jefferies; Price Target: $17.80 from $21.63

• BWP Trust (BWP)

  • Retained at underweight at Morgan Stanley; Price Target: $3.80

• Commonwealth Bank of Australia (CBA)

  • Retained at sell at Citi; Price Target: $85.00

• Charter Hall Group US Prohibited (CHC)

  • Retained at overweight at Morgan Stanley; Price Target: $14.99

• Chalice Mining (CHN)

  • Downgraded to neutral from buy at UBS; Price Target: $1.50 from $1.45

• Centuria Industrial Reit (CIP)

  • Retained at hold at Bell Potter; Price Target: $3.35

• Capricorn Metals (CMM)

  • Retained at buy at Bell Potter; Price Target: $6.53 from $6.50

• Centuria Capital Group (CNI)

  • Retained at overweight at Morgan Stanley; Price Target: $2.03

• Centuria Office Reit (COF)

  • Retained at underweight at Morgan Stanley; Price Target: $1.40

• Deterra Royalties (DRR)

  • Retained at neutral at Citi; Price Target: $5.20

  • Retained at overweight at Morgan Stanley; Price Target: $5.60

• Dexus Industria Reit. (DXI)

  • Retained at sell at Bell Potter; Price Target: $2.80

• Dexus (DXS)

  • Retained at underweight at Morgan Stanley; Price Target: $8.14

• Evolution Energy Minerals (EV1)

  • Retained at buy at Shaw and Partners; Price Target: $0.24 from $0.40

• Evolution Mining (EVN)

  • Retained at overweight at Morgan Stanley; Price Target: $3.90 from $4.20

• Fortescue (FMG)

  • Retained at underweight at Morgan Stanley; Price Target: $18.85

• Goodman Group (GMG)

  • Retained at overweight at Morgan Stanley; Price Target: $35.65

• HMC Capital (HMC)

  • Retained at hold at Bell Potter; Price Target: $7.30

• IGO (IGO)

  • Retained at underweight at Morgan Stanley; Price Target: $6.05

• Immutep (IMM)

  • Retained at buy at Bell Potter; Price Target: $0.80

• Light & Wonder Inc. Xngs (LNW)

  • Initiated at add at Morgans; Price Target: $172.00

• National Australia Bank (NAB)

  • Retained at sell at Citi; Price Target: $26.50

• Nickel Industries (NIC)

  • Retained at overweight at Morgan Stanley; Price Target: $0.95

• National Storage Reit (NSR)

  • Retained at buy at Citi; Price Target: $2.60

  • Retained at underweight at Morgan Stanley; Price Target: $2.35

• Northern Star Resources (NST)

  • Retained at equal-weight at Morgan Stanley; Price Target: $14.50 from $14.90

• Orora (ORA)

  • Retained at buy at Citi; Price Target: $2.86

• Origin Energy (ORG)

  • Retained at equal-weight at Morgan Stanley; Price Target: $10.00 from $9.50

• Paladin Energy (PDN)

  • Retained at overweight at Morgan Stanley; Price Target: $17.45

• Pilbara Minerals (PLS)

  • Retained at underweight at Morgan Stanley; Price Target: $3.35

• Red 5 (RED)

  • Initiated at outperform at Macquarie; Price Target: $0.50

• Region Group (RGN)

  • Retained at overweight at Morgan Stanley; Price Target: $2.50

• Rio Tinto (RIO)

  • Retained at neutral at Citi; Price Target: $137.00

  • Retained at overweight at Morgan Stanley; Price Target: $137.50

• Regis Resources (RRL)

  • Retained at overweight at Morgan Stanley; Price Target: $2.50 from $2.45

• South32 (S32)

  • Retained at neutral at Citi; Price Target: $4.00

  • Retained at overweight at Morgan Stanley; Price Target: $3.35

• Scentre Group (SCG)

  • Retained at overweight at Morgan Stanley; Price Target: $3.79

• Stockland (SGP)

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

• Sigma Healthcare (SIG)

  • Retained at sell at Shaw and Partners; Price Target: $1.00

• Southern Cross Gold (SXG)

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

• Vanguard All-World Ex-US Shares Index ETF (VEX)

  • Retained at underweight at Morgan Stanley; Price Target: $2.17

• Westpac Banking Corporation (WBC)

  • Retained at sell at Citi; Price Target: $24.75

• Whitehaven Coal (WHC)

  • Retained at overweight at Morgan Stanley; Price Target: $9.65 from $9.40

• Waypoint Reit (WPR)

  • Retained at underweight at Morgan Stanley; Price Target: $2.56

Scans