Evening Wrap: ASX 200 ends on solid footing as gold and energy stocks fire, lithium enters complete meltdown mode

Aussie investors will be relieved to see the back of this week.

It was a week that carried with it significant event risk, with plenty of important economic data and an RBA interest rate meeting.

We got through it with a win, albeit a modest one.

Today's trading was a solid vote of confidence in Aussie shares with a broad and sustained move higher.

It was good to see gold and energy stocks up and about again, as well as health care, telcos, and utilities.

Notably absent from the weekly winners list – Resources. They weren't terrible today though, unless of course we're talking about lithium stocks.

Very, very ugly there. 😭

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 26.6 points higher at 7,796, 0.54% from its session low and smack-bang on its session high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by an impressive 163 to 101.

For the week, the XJO finished up 71.7 points or 0.93% higher, 1.27% from its intraweek low and again, smack-bang on its high.

The Gold (XGD) (+2.3%) sub-index was the best performing sector today, likely in response to a continued improvement in gold and silver pricing overnight.

Gold stocks logged a second solid day of gains

It was back to defence from there, with the next three of the four best performing sectors Utilities (XUJ) (+1.9%), Communication Services (XTJ) (+1.0%), and Health Care (XHJ) (+1.0%) each logging solid gains. These sectors are generally favoured when the big fund managers aren’t so sure about where to stick their cash. 🤔

It was good to see Health Care return to its winning ways, as it was also to see the Energy (XEJ) (+1.1%) sector continue to scrape itself off the canvas.

Energy stocks made it four from four today

Just three of the major ASX sectors were down today, and you can probably guess one of them. Materials (XMJ) (-0.02%) only edged slightly lower, but it capped off a bruising week, elsewhere the hodge-podge of stocks in Industrials (XNJ) lost -0.14% and Consumer Discretionary (XDJ) dipped -0.4%.

ChartWatch

S&P/ASX 200 (XJO)

A super interesting chart

The last time we covered the XJO was in ChartWatch in the Evening Wrap on 17 June.

In that update, I said there really wasn’t much to see or do until we either closed above supply at 7862-7911 (bullish) or close below demand at 7489-7601 (bearish).

Ditto. But at least after what was actually a pretty solid week – we’re looking more likely to do the former rather than the latter.

Tuesday’s strong demand-side candle is the key, as well as the complete lack of supply-side volatility since. It speaks of a lazy supply side and growing demand-side control.

I know we’ve gone good-bad-good-bad time it feels about 10 over the last few months, but let’s just say I have a good feeling about this time.

Famous.

Last.

Words! 😁

NVIDIA Corporation (NVDA)

Price action, volatility, and volume are powerful indicators when used together

Given the veritable coma our market was in this week, let's look abroad to where possibly the most action was in of any listed security – NVIDIA.

No doubt you heard the headlines about it becoming the most valuable company on Tuesday, and probably also about its spectacular reversal last night.

As the old saying goes: Talk is cheap, headlines are cheaper.

Price action, on the other hand, never lies!

For those of you who are reading my stuff for the first time, price action refers to the relative position of points of demand and points of supply i.e., peaks and troughs, plus Japanese candlesticks.

In my experience, when you combine price action with volatility and volume – you have at your disposal the most powerful indicators of demand and supply and how it might be changing over time.

I’ve highlighted on the NVDA chart above two sets of arrows. They look very similar:

• Price Action: A large black-bodied candle that engulfs the previous candle

• Volatility: Much larger than most candles in the recent past (the red bar chart)

• Volume: Elevated volume (the blue bar chart)

There are two key indications from this combination of technical factors.

1. Demand peak interest, then exhaustion

2. Exertion of supply-side control

Given these factors in combination often signal a transition between demand-side and supply-side control, this is what I said in social media after the first black candle event back in March.

As always, remember: The future is unknown, anything can happen.

Economy

Today

• AUS Flash Manufacturing PMI June

  • 47.5 vs 49.7 in May = 3 month low

  • Values below 50 indicate contraction – so we saw manufacturing contract by a greater amoung

• AUS Flash Services PMI June

  • 51.0 vs 52.5 in May = 5 month low

  • Still growing, but by a slower rate

  • Composite Index 50.6 vs 52.1 in May just hanging on to expansion

Later this week

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

• +15.8% Talga Group (TLG) - Talga and SQM enter lithium partnership agreement in Sweden

• +7.5% Botanix Pharmaceuticals (BOT) - Botanix $70 Million Institutional Capital Raising, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.9% Jupiter Mines (JMS) - No news, tracking bounce in base metals prices

• +6.8% Cooper Energy (COE) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.5% Alkane Resources (ALK) - NMPP Regional Exploration Update

• +5.6% Aurelia Metals (AMI) - No news, tracking bounce in base metals prices, rise is consistent with prevailing long term uptrend, closed back above short term uptrend ribbon 🔎📈

• +5.2% Helia Group (HLI) - Still bouncing back after positive broker response to Wednesday's Update on CBA contract, closed back above long term uptrend ribbon 🔎📈

• +5.0% Westgold Resources (WGX) - No news, generally stronger ASX gold sector today on rising gold price, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.8% Temple & Webster Group (TPW) - No news, bouncing off long term trend ribbon 🔎📈

• +4.7% Strike Energy (STX) - Terms agreed for $153m Development Funding Package

• +4.4% Genesis Minerals (GMD) - No news, generally stronger ASX gold sector today on rising gold price, rise is consistent with prevailing long term uptrend, closed back above short term uptrend ribbon 🔎📈

• +4.4% Alumina (AWC) - No news, tracking bounce in base metals prices

• +4.2% Evolution Mining (EVN) - No news, generally stronger ASX gold sector today on rising gold price, bouncing off long term uptrend ribbon 🔎📈

• +4.0% Ramelius Resources (RMS) - No news, generally stronger ASX gold sector today on rising gold price, rise is consistent with prevailing long term uptrend, closed back above short term uptrend ribbon 🔎📈

Trading lower

• -10.7% WA1 Resources (WA1) - No news, correction after big pop on Wednesday's West Arunta Project - Luni Metallurgical Results continues

• -8.8% Core Lithium (CXO) - No news, lithium prices continue to fall in China, fall is consistent with prevailing short and long term downtrends 🔎📈

• -8.0% Regal Partners (RPL) - No news 🤔

• -7.0% Mineral Resources (MIN) - No news, combination of reaction to broker coverage of Wednesday's Yilgarn Hub Update and lower lithium prices, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -5.2% Clarity Pharmaceuticals (CU6) - No news 🤔

• -5.1% Liontown Resources (LTR)- No news, lithium prices continue to fall in China, fall is consistent with prevailing short and long term downtrends 🔎📈

• -4.8% IGO (IGO) - No news, lithium prices continue to fall in China, fall is consistent with prevailing short and long term downtrends 🔎📈

Broker Notes

• Alpha HPA (A4N)

  • Retained at buy at Bell Potter; Price Target: $2.00

• Aeris Resources (AIS)

  • Retained at buy at Bell Potter; Price Target: $0.30

• Aurizon (AZJ)

  • Retained at neutral at Macquarie; Price Target: $3.73

• Beach Energy (BPT)

  • Downgraded to underperform from neutral at Bank of America; Price Target: $1.40 from $1.60

  • Retained at neutral at Macquarie; Price Target: $1.50 from $1.55

• Cosol (COS)

  • Retained at hold at Bell Potter; Price Target: $1.20 from $1.10

• CSL (CSL)

  • Retained at neutral at Citi; Price Target: $305.00

• Domain Australia (DHG)

  • Retained at buy at Citi; Price Target: $3.40 from $3.85

• Delta Lithium (DLI)

  • Retained at buy at Bell Potter; Price Target: $0.75

• Deterra Royalties (DRR)

  • Downgraded to equal-weight from overweight at Morgan Stanley; Price Target: $3.70 from $5.60

• Dreadnought Resources (DRE)

  • Retained at buy at Bell Potter; Price Target: $0.15

• Develop Global (DVP)

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

• Dexus (DXS)

  • Retained at neutral at Citi; Price Target: $8.20

• Elders (ELD)

  • Retained at buy at Bell Potter; Price Target: $9.30

• Evolution Mining (EVN)

  • Retained at buy at Citi; Price Target: $4.40 from $4.50

• Green Technology Metals (GT1)

  • Retained at buy at Bell Potter; Price Target: $0.39

• Helia Group (HLI)

  • Retained at neutral at Goldman Sachs; Price Target: $4.53

• Hansen Technologies (HSN)

  • Retained at neutral at Goldman Sachs; Price Target: $4.85 from $5.20

• IVE Group (IGL)

  • Retained at buy at Bell Potter; Price Target: $2.70

• Karoon Energy (KAR)

  • Retained at outperform at Macquarie; Price Target: $2.45 from $2.50

• Latin Resources (LRS)

  • Retained at buy at Bell Potter; Price Target: $1.85

• Arcadium Lithium (LTM)

  • Retained at buy at Bell Potter; Price Target: $9.50

• Mineral Resources (MIN)

  • Retained at buy at Bell Potter; Price Target: $85.00

  • Retained at buy at Citi; Price Target: $80.00 from $79.00

  • Retained at sell at Jarden; Price Target: $48.50 from $47.20

  • Retained at outperform at Macquarie; Price Target: $75.00

  • Retained at hold at Morgans; Price Target: $66.00 from $71.00

  • Retained at outperform at RBC Capital Markets; Price Target: $84.00 from $85.00

• Medibank Private (MPL)

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

• MMA Offshore (MRM)

  • Retained at hold at Bell Potter; Price Target: $2.70 from $2.60

• NIB (NHF)

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

• Nextdc (NXT)

  • Retained at buy at Citi; Price Target: $19.53

• Pioneer Lithium (PLS)

  • Retained at buy at Bell Potter; Price Target: $3.60

• QBE Insurance Group (QBE)

  • Retained at buy at Goldman Sachs; Price Target: $20.60 from $20.90

• REA Group (REA)

  • Upgraded to buy from neutral at Citi; Price Target: $221.00 from $192.60

• Santos (STO)

  • Retained at outperform at Macquarie; Price Target: $8.90 from $9.20

• South32 (S32)

  • Downgraded to equal-weight from overweight at Morgan Stanley; Price Target: $3.80 from $3.35

• Talga Group (TLG)

  • Retained at buy at Bell Potter; Price Target: $2.35

• Treasury Wine Estates (TWE)

  • Retained at neutral at Citi; Price Target: $12.95 from $12.40

  • Retained at buy at Goldman Sachs; Price Target: $15.20 from $13.40

  • Upgraded to buy from overweight at Jarden; Price Target: $14.50

  • Retained at buy at Jefferies; Price Target: $16.00

  • Retained at outperform at Macquarie; Price Target: $13.60 from $13.80

  • Retained at overweight at Morgan Stanley; Price Target: $14.60 from $14.50

  • Retained at buy at UBS; Price Target: $14.50 from $15.00

• Woodside Energy Group (WDS)

  • Retained at outperform at Macquarie; Price Target: $32.00

• Woolworths Group (WOW)

  • Upgraded to overweight from underweight at Morgan Stanley; Price Target: $37.00 from $31.00

Scans