Evening Wrap: ASX 200 dips on resources pullback but uranium stocks rally sparks again

The heroics in the Resources sector finally took a breather today, and whilst 2-3% declines were not uncommon, one would think Aussie investors would have happily taken the still-15-20% gains in most stocks in the sector if presented with such a scenario at the doldrums a couple of weeks ago.

Major banking stocks were also lower today, and if banks and resources are down, there's a very good chance the S&P/ASX 200 index must therefore also be down. It certainly was the case today.

As bad as it all sounds, one must consider two perspective adding items:

1. It's the first day of a new quarter. The last day of the last quarter was a ripper – it's not uncommon to see fund manager shenanigans around these days, and for them be polar opposites of each other; and

2. We made record high after record high in September, small pullbacks like today's aren't necessarily a bad thing...they drag out some of the hot money and weaker hands and present discounts to longer term accumulators.

Click/scroll through 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 200 in today's ChartWatch.

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 60.9 points lower at 8,208.9, 0.74% from its session high and just 0.27% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 122 to 161.

The Health Care (XHJ) (+1.1%) sector was the best performing sector today, for a change, as Materials (XMJ) (-2.3%) and Financials (XFJ) (-1.2%) pulled back. It’s all part of the pull some money out of this sector and put it over there strategy typical of Aussie fund managers around quarter-end/start. Healthcare has been a major laggard lately, so possibly there was some relative value seen in that sector today.

As far as the rest of the sectors, it was a little all over the place today, with few clearly discernible themes. Uranium stocks bounced back, there was that… Otherwise, really, it was mainly about the Resources pullback – and one could argue there was a sense of inevitability there. You can add in the odd stock specific item which we will cover off in the Interesting Moves section below.

Possibly contributing to the Resources pullback is the lack of continued positive leads from Chinese stocks – they were closed today, and will be for the rest of the week for National Day holidays.

Doing well today…uranium stocks

Doing it tough today…the big banks and miners

ChartWatch

ASX All Ordinaries Total Return Index (XAOA)

In the long run we're all dead...oh...and stocks go up!

This is a chart we don’t often consider (it’s the first time I’ve ever shown it here). The All Ordinaries was the benchmark Australian index before the introduction of the S&P/ASX 200 (XJO) in March 2000. It contains roughly 500 of the biggest ASX companies compared to the XJO’s 200, and therefore it is in my opinion the slightly better of the two in terms of representing the broader Aussie share market.

I say “slightly” because both indices are market capitalisation weighted, and to be fair, once you trundle past stock number 200 – your collective market cap from there isn’t having much of an impact on the collective market cap of the first 200. Still, when it comes to breadth measures like gainers and fallers, there’s definitely some value in looking at the All Ords vs the XJO.

The “Total Return” aspect simply means “adding back dividends”. As you’re aware, when a company pays a dividend, its share price will usually fall by the dividend amount. Total return indices such as the one above, the XAOA, add back those dividends to give a better representation of the true return of an index.

I’ve deliberately zoomed out here to all the data I have, which goes back to 1993. I’ve also switched the scale to logarithmic so we can consider percentage / proportional moves.

A few things strike me about the above chart:

• Steady as she goes, on a total return basis stocks spend way more time in an uptrend than a downtrend

• Short term dynamic demand is a cracker – my short term trend ribbon more often than not does a great job of determining a medium-long term value zone (note – "short term" is just the name I apply to the shorter duration of my two trend ribbons – on a daily chart it is short term – but we’re looking at a monthly chart here…so it’s not as short term as you might think!)

• Really nasty bear markets, particularly the GFC and COVID-19 are few and far between – but you still don’t want to get stuck in one!

What’s the value in looking at this chart? In my long experience in this game, there have always been (and still are) naysayers painting doom and gloom scenarios for stocks. At times in the past, that is before I adopted my current trend following approach, I admit I was also prone to thinking “It’s gone up too much…surely this can’t go on…surely we’re overdue for a crash!”.

There was a time I cared about what’s going to happen next, and I spent a great deal of time and effort trying to predict it.

At some point, however, I realised predicting the future is an abjectly pointless exercise. It’s impossible. Nobody ever in the history of mankind has every been able to do it consistently with any accuracy, and nobody ever will.

Perhaps a little bit of age and experience has taught me to stop trying to do impossible (and stupid) stuff that’s a total waste of time. I’ll leave that to you younger folk who still believe putting in the effort to try and predict the future is a worthwhile pursuit!

Now I just follow the trend.

At some point that trend is going to bend. I hope / trust that I’ll see the signs it’s doing so, and I’ll adjust my exposure to the market accordingly. At some point that trend is going to end. I hope / trust that I’ll see the signs it’s doing so, and I’ll adjust my exposure accordingly.

In case you didn’t get the important bit, it’s this: “…and I’ll adjust my risk accordingly”. The market will go up, it will go down, and it will go sideways – but in all cases I will manage my risk meticulously, never betting too much in one place.

The market is going to do what the market is going to do. You can’t control or predict this. The only thing you do have control over (if you choose to exercise it) is how you react to what the market does.

S&P/ASX 200 (XJO)

Alert, not alarmed, as usual

The last time we covered XJO was in ChartWatch in the Evening Wrap on 26 September.

In that update, we were tracking the most recent test and hold of the 8149-8117 demand zone. The push from there was short lived, given today’s supply side candle, and therefore the setting of 8286 as a peak / point of demand.

Black candles of a decent size (I reckon today's candle sneaks in as "decent"!) that close on the low of the session – are the perfect manifestation of excess supply. I am going to say that last candle is in theory a credible supply side showing. Not ideal for a bull in a bull market.

But! If it were any other day apart from the first day after the end of a quarter – I’d probably be more concerned. Given the nature of overall short and long term trends (they’re both very, very good), I’m going to discount today’s move as fund manager shenanigans for now.

I’ll be more concerned about a close below the 8111 point of demand, and even more concerned about a close below the dynamic demand of the short term uptrend ribbon. As always, lower peaks represent building supply and lower troughs represent demand removal – I’m going to watch closely for those signals also.

Until then, I must trust the prevailing trends and price action: Alert, not alarmed, as usual.

Economy

Today

• AUS Retail Sales August

  • +0.7% m/m vs +0.4% forecast and +0.1% in July; +3.1% p.a.

  • Substantially better than expected, with strong growth in discretionary retail: +1.5% m/m for Clothing, footwear and personal accessory, +1.6% m/m for Department stores, and +1.0% m/m Cafes, restaurants and takeaway food services vs modest growth in Food (+0.6% m/m) and a dip in Household goods (-0.3% m/m)

  • Data likely reduces the desire of the RBA to cut interest rates any time soon...

Later this week

Tuesday

• All Day CHN National Day Public Holiday

• 03:55 USA Federal Reserve Chairman Jerome Powell speaks

• 19:00 EUR Core Consumer Price Index (CPI) Flash Estimate September (+2.7% p.a. forecast vs +2.8% forecast in August)

Wednesday

• All Day CHN National Day Public Holiday

• 00:00 USA ISM Manufacturing PMI September (47.6 forecast vs 47.2 in August)

• 00:00 USA JOLTS Job Openings (7.64 million forecast vs 7.67 million in August)

• 01:00 - 08:15 USA 4 x Federal Reserve Speakers (Bostic, Cook, Barkin, Collins)

Thursday

• All Day CHN National Day Public Holiday

Friday

• All Day CHN National Day Public Holiday

• 22:30 USA Non-Farm Payrolls September

  • Employment change 144,000 forecast vs 142,000 previous in August

  • Unemployment rate 4.2% forecast vs 4.2% in August

  • Average Hourly Earnings +0.3% m/m forecast vs +0.4% m/m in August

Latest News

Interesting Movers

Trading higher

• +22.6% Sigma Healthcare (SIG) - ACCC Public Consultation regarding Proposed Undertakings, rise is consistent with prevailing short and long term uptrends (ChartWatch Scans Uptrends list stalwart!) 🔎📈.

• +7.1% Opthea (OPT) - Opthea to participate in UBS Virtual Ophthalmology Day 2024, rise is consistent with prevailing short and long term uptrends (ChartWatch Scans Uptrends list stalwart!) 🔎📈.

• +4.9% REA Group (REA) - REA withdraws possible offer for Rightmove, rise is consistent with prevailing long term uptrend / bounced off long term uptrend ribbon 🔎📈.

• +4.7% Deep Yellow (DYL) - No news, generally stronger day for ASX uranium sector, candles, price action and trends are recovering here, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +4.2% Fletcher Building (FBU) - No news, continued positive response to 30 Sep Fletcher Building completes the sale of Tradelink and Capital Change - Placement & Institutional Entitlement Offer.

• +4.1% Clarity Pharmaceuticals (CU6) - COBRA study selected as a Top-Rated Oral Presentation, rise is consistent with prevailing short and long term uptrends (ChartWatch Scans Uptrends list stalwart!) 🔎📈.

• +4.0% Boss Energy (BOE) - No news, ditto uranium.

• +3.6% Clinuvel Pharmaceuticals (CUV) - Canadian New Drug Submission for SCENESSE in EPP filed.

• +3.4% Mesoblast (MSB) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +3.3% Droneshield (DRO) - No news, rise is consistent with prevailing long term uptrend, short term trend is transitioning from down to up 🔎📈.

• +3.2% Healius (HLS) - No news, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈.

Trading lower

• -6.8% The Star Entertainment Group (SGR) - No news, continued negative response to 30 Sep FY2024 Financial Report and 27 Sep NSW Show Cause Notice & Treasury casino building sale.

• -6.6% Spartan Resources (SPR) - Application for quotation of securities.

• -5.0% Tabcorp (TAH) - Becoming a substantial holder - State Street Corporation (State Street is a rumoured active short seller), fall is consistent with prevailing long term downtrend 🔎📉.

• -4.5% Strike Energy (STX) - Erregulla Deep-1 Flowtest Commences and SE Power Project Receives Full Network Access Quantity, also check several broker notes today (see Broker Notes section), fall is consistent with prevailing long term downtrend 🔎📉.

• -4.3% De Grey Mining (DEG) - No news.

• -4.2% Capstone Copper Corp. (CSC) - Lower copper price in London and on COMEX last night.

• -4.0% Cettire (CTT) - No news, fall is consistent with prevailing long term downtrend 🔎📉.

• -3.5% Arcadium Lithium (LTM) - No news, generally weaker Resources sector today, pullback after strong post-China stimulus news gains, bounced lower off long term downtrend ribbon 🔎📉.

• -3.5% Fortescue (FMG) - No news, ditto generally weaker Resources sector today, bounced lower off long term downtrend ribbon 🔎📉.

• -3.4% Qantas Airways (QAN) - Qatar Airways to take 25% stake in Virgin Australia.

• -3.2% Ora Banda Mining (OBM) - Downgraded to hold from buy at Moelis Australia, price target increased though, to $0.66 from $0.47.

• -3.1% Alcoa Corporation (AAI) - No news, ditto generally weaker Resources sector today.

• -2.9% BHP Group (BHP) - No news, generally weaker Resources sector today, pullback after strong post-China stimulus news gains.

Broker Notes

• Life360 (360)

  • Retained at buy at Goldman Sachs; Price Target: $21.85 from $19.75

• AGL Energy (AGL)

  • Retained at overweight at Morgan Stanley; Price Target: $12.88

• Aristocrat Leisure (ALL)

  • Retained at outperform at Macquarie; Price Target: $55.00

• Australian Vanadium (AVL)

  • Retained at buy at Shaw and Partners; Price Target: $0.81

• BHP Group (BHP)

  • Retained at buy at Citi; Price Target: $46.00

• Develop Global (DVP)

  • Retained at buy at Bell Potter; Price Target: $3.20 from $3.50

• EBR Systems (EBR)

  • Retained at buy at Bell Potter; Price Target: $2.01 from $1.96

• Light & Wonder (LNW)

  • Retained at outperform at Macquarie; Price Target: $169.00

• Matrix Composites & Engineering (MCE)

  • Initiated at buy at Morgans; Price Target: $0.44

• Ora Banda Mining (OBM)

  • Downgraded to hold from buy at Moelis Australia; Price Target: $0.66 from $0.47

• Orica (ORI)

  • Downgraded to neutral from overweight at Jarden; Price Target: $18.50

• Percheron Therapeutics (PER)

  • Retained at buy at Morgans; Price Target: $0.24

• Qoria (QOR)

  • Downgraded to hold from buy at Argonaut Securities; Price Target: $0.42 from $0.40

  • Retained at buy at Ord Minnett; Price Target: $0.47 from $0.44

• REA Group (REA)

  • Retained at outperform at Macquarie; Price Target: $230.00

• Rio Tinto (RIO)

  • Retained at neutral at Citi; Price Target: $123.00

• RMA Global (RMY)

  • Retained at buy at Bell Potter; Price Target: $0.11 from $0.10

• Scentre Group (SCG)

  • Downgraded to neutral from buy at Bank of America; Price Target: $3.80 from $3.65

• Siteminder (SDR)

  • Retained at buy at Citi; Price Target: $7.20 from $6.60

• The Star Entertainment Group (SGR)

  • Retained at hold at Ord Minnett; Price Target: $0.30

• Synlait Milk (SM1)

  • Retained at hold at Bell Potter; Price Target: $0.43 from $0.47

• Strike Energy (STX)

  • Retained at buy at Goldman Sachs; Price Target: $0.25 from $0.28

  • Retained at neutral at Macquarie; Price Target: $0.23

  • Retained at buy at Ord Minnett; Price Target: $0.32 from $0.31

• Seven Group (SVW)

  • Retained at outperform at Macquarie; Price Target: $47.80 from $43.90

• Vicinity Centres (VCX)

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

• Xero (XRO)

  • Retained at buy at Citi; Price Target: $158.20

Scans