Evening Wrap: ASX 200 dips on banks, tech, as cash floods back to resources. Plus: It's a lithium miracle!

Do you believe in miracles? I would have said prior to today that's exactly what it would take to arrest the nearly 2-year long withering slide in the ASX lithium sector. Today's 10-15% gains almost across the board in that sector might feel like a miracle to many a long suffering Aussie lithium investor.

The reason? A major Chinese battery manufacturer (CATL) has decided to suspend operations at two of its mainland lepidolite mines. Lepidolite is the low grade alternative to the higher grade spodumene mined many Australian producers, and it is widely blamed for much of the supply that has flooded the lithium minerals market, severely depressing prices.

The benchmark lithium carbonate futures contract on the GFEX exchange in China popped nearly 9% on the news today. But some might question, if prices go back up again, won't that mean CATL with just restart production?

These are questions far to vague and significant for us to answer here, but the charts may tell the story - I have detailed technical analysis on those lithium carbonate futures in today's ChartWatch.

You'll also find the usual reporting of the major stock-specific moves, the broker responses to them, as well as all of the key upcoming economic data in tonight's Evening Wrap...so....

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 24.0 points lower at 7,987.9, 0.46% from its session high and 0.3% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 125 to 144.

No surprise given the heroics in the ASX lithium sector that the Materials (XMJ) (+1.7%) sector was the best performer today. Having said that, relatively flying under the radar were some solid gains in the iron ore majors as we also saw a modest rebound in the iron ore price in Singapore today. Gold (XGD) (+1.1%) also bounced back, adding extra support.

One argument that’s been doing the rounds lately in the broker research reports I read, is that because resources have been uninvestable for months now, much of the money that might usually have been funnelled their way has been crowding into big-cap (and therefore liquid) financial and technology names.

If this is true, then we should have seen corresponding falls in the Information Technology (XIJ) (-1.4%) and Financials (XFJ) (-1.5%) sectors today. Hmmm, check! Ok, let’s call that theory irrefutable based upon today’s single data point!

Does this mean that Aussie investors can’t have their mining sector gains and eat it with their financial sector gains? My experience lends weight to the theory that fund managers investing in Australia do switch between these sectors, and they do overindulge in one well performing sector when the other isn’t doing so well. It reduces their risk of underperforming the index.

So, it wouldn’t surprise me if in the very short term at least, we continue to see financials (and possibly to a lesser extent, big tech) suffer at the expense of few-days resources rally.

The best performing ASX mining stocks today (note also iron ore and uranium names got a leg up today, too)

The worst performing ASX stocks today (note how many from Financials and Tech)

ChartWatch

Lithium Carbonate Futures (Benchmark month, back-adjusted) GFEX

Just the start...but of what?

The last time we covered lithium carbonate futures was in ChartWatch in the Evening Wrap on 6 September.

In that update, it was doing what it has done pretty much since its inception back in July last year, falling.

There was a trifle of a fuss today, not sure if you noticed, on the back of some news – hence that last white candle.

All of those massive moves in ASX lithium stocks today…for that one candle…in what remain clearly defined short and long term downtrends. At least for now.

Whether this is just a bear market rally, or the beginning of the next bull market in lithium minerals, both scenarios tend to start in the same way – with long white candles accompanied by a substantial influx of volume.

The white candle indicates a single-minded desire among market participants to be owners not sellers. The longer the white candle, the greater that desire.

The volume indicates both interest and conviction. It also indicates supply removal, and in many cases when a significant low is made – all important short covering.

So, there’s a few checks in the “something is definitely up here” box. But, one candle rarely does a new bull market make!

From here, if this bear market rally has any legs, we'll see the price close decisively above both static and dynamic supply zones – so 79350 and the short term trend ribbon in the short term, and 90550 and the long term uptrend ribbon in the long term.

We should also see the current environment of falling peaks and falling troughs transition to rising peaks and rising troughs, as well as the trend ribbons transitioning from areas of dynamic supply to areas of dynamic demand.

So, there’s clearly much work still required here for me to call that “the low” is in. It’s a good start – but it’s just that – a start..

Economy

Today

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

Later this week

Wednesday

• 22:30 USA Core CPI August (+0.2% m/m to +3.1% p.a. forecast vs +0.2% to +3.2% p.a. in July)

Thursday

• 22:15 EUR ECB Main Refinancing Rate & Monetary Policy Statement (-0.50% forecast to 4.25%)

• 22::30 USA Core PPI August (+0.2% m/m to +2.4% p.a. forecast vs +0.2% to +2.4% p.a. in July)

Saturday

• 00:00 USA Prelim UoM Consumer Sentiment August (68.4 forecast vs 67.9 July)

Latest News

Interesting Movers

Trading higher

• +18.9% Wildcat Resources (WC8) - Lithium rally

• +17.4% Sayona Mining (SYA) - ditto lithium rally

• +17.2% Ioneer (INR) - ditto lithium rally

• +15.9% Mineral Resources (MIN) - ditto lithium rally

• +13.6% Core Lithium (CXO) - ditto lithium rally

• +13.1% Pilbara Minerals (PLS) - ditto lithium rally

• +13.1% Liontown Resources (LTR) - ditto lithium rally

• +12.5% Latin Resources (LRS) - ditto lithium rally

• +11.4% Arcadium Lithium (LTM) - ditto lithium rally

• +10.9% Pointsbet (PBH) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +9.1% Adriatic Metals (ADT) - Half Year Accounts

• +9.0% Chalice Mining (CHN) - No news, tagged along with the lithium rally

• +8.5% Novonix (NVX) - Same as CHN

• +5.4% Vulcan Energy Resources (VUL) - Lithium rally

• +4.9% IGO (IGO) - ditto lithium rally

• +4.8% Develop Global (DVP) - ditto lithium rally

Trading lower

• -10.5% Adairs (ADH) - Resignation of non-executive director, plus ex-dividend $0.07 fully franked

• -8.8% Jupiter Mines (JMS) - No news, fall is consistent with prevailing short and long term downtrends 🔎📈

• -7.4% Cettire (CTT) - No news, fall is consistent with prevailing long term downtrend 🔎📈

• -5.5% Nextdc (NXT) - Completion of A$550 Million Placement, see also several broker updates in Broker Moves section (generally positive though)

• -5.5% IVE Group (IGL) - Ex-div $0.085 fully franked, but this was a positive: Change of Director's Interest Notice (on market purchase)

• -4.1% Appen (APX) - No news, consistent with recent volatility

• -3.9% Accent Group (AX1) - Ex-div $0.045 fully franked

Broker Notes

• Life360 (360)

  • Retained at buy at Goldman Sachs; Price Target: $19.75

• Aussie Broadband (ABB)

  • Initiated at neutral at UBS; Price Target: $3.95

• Abacus Group (ABG)

  • Retained at buy at Citi; Price Target: $1.35

• ARB Corporation (ARB)

  • Upgraded to overweight from equal-weight at Morgan Stanley; Price Target: $46.00 from $40.50

• Abacus Storage King (ASK)

  • Retained at buy at Citi; Price Target: $1.40

• BWP Trust (BWP)

  • Retained at sell at Citi; Price Target: $3.40

• Collins Foods (CKF)

  • Retained at neutral at Citi; Price Target: $7.88

• Charter Hall Long Wale Reit (CLW)

  • Retained at neutral at Citi; Price Target: $3.70

• Coles Group (COL)

  • Retained at buy at Citi; Price Target: $21.00

• CSL (CSL)

  • Retained at outperform at Macquarie; Price Target: $330.00

• Domino's Pizza Enterprises (DMP)

  • Retained at buy at Citi; Price Target: $38.50

• Duratec (DUR)

  • Retained at buy at Bell Potter; Price Target: $1.58 from $1.52

  • Retained at buy at Shaw and Partners; Price Target: $1.50

• Dexus (DXS)

  • Retained at neutral at Citi; Price Target: $7.30

• Endeavour Group (EDV)

  • Retained at neutral at Citi; Price Target: $5.18

• Fortescue (FMG)

  • Upgraded to outperform from sector perform at RBC Capital Markets; Price Target: $20.00

• Goodman Group (GMG)

  • Retained at buy at Citi; Price Target: $40.00

  • Upgraded to buy from neutral at Jarden; Price Target: $40.00 from $37.60

• Growthpoint Properties Australia (GOZ)

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

• GPT Group (GPT)

  • Retained at buy at Citi; Price Target: $4.90

• Hub24 (HUB)

  • Retained at neutral at Citi; Price Target: $56.70 from $47.00

• Ingenia Communities Group (INA)

  • Retained at buy at Citi; Price Target: $6.15

• Lifestyle Communities (LIC)

  • Retained at neutral at Citi; Price Target: $9.50

• Lendlease Group (LLC)

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

• Mirvac Group (MGR)

  • Retained at neutral at Citi; Price Target: $2.10

• Mineral Resources (MIN)

  • Retained at buy at Citi; Price Target: $50.00

• Metcash (MTS)

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

• National Storage Reit (NSR)

  • Retained at buy at Citi; Price Target: $2.70

• Nufarm (NUF)

  • Retained at hold at Bell Potter; Price Target: $4.05

• News Corporation (NWS)

  • Retained at buy at Goldman Sachs; Price Target: $48.90

• Nextdc (NXT)

  • Retained at buy at Citi; Price Target: $19.25

  • Retained at buy at Goldman Sachs; Price Target: $18.50

  • Retained at outperform at Macquarie; Price Target: $21.20

  • Retained at accumulate at Ord Minnett; Price Target: $20.00

  • Retained at buy at UBS; Price Target: $19.40

• Qualitas Real Estate Income Fund (QRI)

  • Retained at buy at Citi; Price Target: $1.60

• Region Group (RGN)

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

• Scentre Group (SCG)

  • Retained at neutral at Citi; Price Target: $3.60

  • Retained at accumulate at Ord Minnett; Price Target: $3.80 from $3.50

• Steadfast Group (SDF)

  • Retained at equal-weight at Morgan Stanley; Price Target: $6.64

• Stockland (SGP)

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

• Superloop (SLC)

  • Initiated at buy at UBS; Price Target: $2.20

• Telstra Group (TLS)

  • Retained at buy at UBS; Price Target: $4.95

• Treasury Wine Estates (TWE)

  • Retained at neutral at Citi; Price Target: $12.97

• Vicinity Centres (VCX)

  • Retained at neutral at Citi; Price Target: $2.20

• Viridis Mining and Minerals (VMM)

  • Initiated at buy at Bell Potter; Price Target: $1.70

• Woolworths Group (WOW)

  • Retained at buy at Citi; Price Target: $38.56

Scans