Evening Wrap: ASX 200 gains on banks, resources, as RIO's Arcadium bid puts rocket under ASX lithium sector

The S&P/ASX 200 closed 55.4 points higher, up 0.68%.

It was a solid showing for Aussie stocks Monday despite a public holiday in parts of the nation. Technology and Financials stocks returned to the fore today, both have been outshone in recent weeks by a resurgent Resources sector.

It's not like Resources stocks were down today, though. They also generally prospered as investors weighed up a stronger iron ore price in Asia, and takeover talks between Rio Tinto (ASX: RIO) -2.5%) and beleaguered lithium producer Arcadium Lithium (ASX: LTM) (+46%).

As usual, be sure to 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 and Iron Ore in today's ChartWatch.

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 55.4 points higher at 8,205.4, 0.71% from its session low and just 0.06% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by and emphatic 207 to 78.

The Information Technology (XIJ) (+1.6%) as investors sought out both risk and tech on the back of strong gains in the Nasdaq Composite Index on Friday. Also doing well today were Financials (XFJ) (+1.5%) – a relatively rare win of late as they have been overshadowed by Resources (XJR) (+0.47%). Consumer Discretionary (XDJ) (+0.75%) also outperformed the benchmark XJO.

Today's best performers from the best performing sectors

Doing it tough today was the Gold (XGD) (-1.1%) sub-index, partly due to a modest pullback in the gold price on Friday night and subdued trading in Asia today, but also due to a near-20% rout in African gold miner West African Resources (ASX: WAF).

The company responded to news regarding Burkina Faso President Traore, who delivered a media interview regarding the country’s stance on mining permits. There is speculation that some of WAF’s permits might be at risk, but management indicate they are unaware of any plans to do this so far. Just a bit mess, and a not so gentle reminder of the dangers of investing in mining companies over investing in the commodity directly or via ETFs.

Interest rate sensitives Real Estate Investment Trusts (XPJ) (-0.80%) and Utilities (XUJ) (-0.89%) also struggled today as market yields rose Friday after a substantially stronger than expected US September jobs report.

Today's worst performers from the worst performing sectors

ChartWatch

S&P/ASX 200 (XJO)

An interesting chart

The last time we covered the XJO was in ChartWatch in the Evening Wrap on 1 October.

In that update, we were mulling a distinct supply-side candle for that session – but one I put down to typical end of quarter / start of quarter “fund manager shenanigans” rather than anything more sinister.

I pegged 8111 as the key point of demand, along with the customary demand no doubt you’ve come to expect from my short term trend ribbon (my ribbons actually work don’t they!?).

So far so good, but as I always say: The future is unknown, anything can happen.

So, we try to do good analysis and always follow the trend. We never assume an outcome, but we always manage our risk meticulously.

The “good analysis and trend following” helps us stay on the right side of which market state is more likely to occur, i.e. uptrend, downtrend, or no trend. We “manage our risk” by boosting cash when trends are unclear, and by trying to have a suitable mix of longs and shorts based on the aforementioned trends.

The rest is up to the market. We get what we are given!

8111 appears to be holding here as per Friday’s downward pointing shadow. Remember, a downward pointing shadow points to an area of excess demand, whereas an upward pointing shadow points to an area of excess supply.

Today’s candle is a solid enough demand-side showing, at least it’s likely to be enough to resume the broader short term uptrend. If I have one criticism of the XJO technicals, its that this last peak to trough move has encroached significantly on the last (8247-8111). The less overlap in peak to trough moves – the greater the demand-side control.

So, there is a modest loss of upside momentum here / diminishment of demand-side control.

Looking up, 8286 is supply, and there’s nothing above that.

In summary, I see no reason to doubt the prevailing short and long term uptrend at this stage. I would be more concerned if I saw further supply-side candles immediately after today – we should at least get a few demand-side showings here. Also, I’d be concerned to see the occurrence of a lower peak to 8286, and if the XJO price closes below the short term uptrend ribbon, presently at 8107-8150.

Iron Ore 62% (Front month, back-adjusted) SGX

Is this the most anticipated seasonal rally in history?

The last time we covered iron ore was in ChartWatch in the Evening Wrap on 30 September.

In that update, we were tracking a massive white candle – a response to promises of even more sweeping Chinese stimulus measures to come.

Call it divine intervention or pure dumb luck, the iron ore price is-a-rallying! And this fits nicely with the seasonal end of year rally we’ve come to expect in this market. (I haven’t done a seasonal write up on iron ore for a while, so I’ll dedicate an article to it tomorrow for you – stay tuned!).

Putting aside the fundamentals and the seasonal aspects, and just focussing on demand vs supply equals price – and how my technical model interprets this – I call a trend change when the price begins to behave differently at my trend ribbons:

ST Trend Change ⬆️ to ⬇️: Short term trend ribbon stops acting as dynamic demand and begins acting as dynamic supply (i.e. the price stops bouncing up off my short term trend ribbon and starts to bounce down off it – or you could say the short term trend ribbon switches from supporting upward price action to resisting it)

ST Trend Change ⬇️ to ⬆️: Short term trend ribbon stops acting as dynamic supply and begins acting as dynamic demand (i.e. the price stops bouncing down off my short term trend ribbon and starts to bounce up off it – or you could say the short term trend ribbon switches from resisting upward price action to supporting it)

LT Trend Change ⬆️ to ⬇️: Long term trend ribbon stops acting as dynamic demand and begins acting as dynamic supply (i.e. the price stops bouncing up off my long term trend ribbon and starts to bounce down off it – or you could say the long term trend ribbon switches from supporting upward price action to resisting it)

LT Trend Change ⬇️ to ⬆️: Long term trend ribbon stops acting as dynamic supply and begins acting as dynamic demand (i.e. the price stops bouncing down off my long term trend ribbon and starts to bounce up off it – or you could say the long term trend ribbon switches from resisting upward price action to supporting it)

What does this all mean for the iron ore trends? 🤔

The iron price closed above the short term trend ribbon on 25 Sep, was supported by it in that session and the next, and has not closed below the short term trend ribbon since. Plus, the short term trend ribbon is now rising.

Equals the short term trend in iron ore is now ⬆️.

The iron price closed above the long term trend ribbon on 30 Sep, has been supported by it since, and has not closed below the long term trend ribbon since. Plus, the long term trend ribbon is now rising.

Equals the long term trend in iron ore is now ⬆️.

On caveat on that last bit – ideally, I like to see an emphatic demand-side candle to confirm the start of the new trend in the opposite direction. So, today’s candle (still live) is critical. We really want to see a high close here, and preferably one that probes into the key 114-114.30 supply zone.

The upward pointing shadow on the 30 Sep candle demonstrates there is indeed some pesky excess supply to contend with up there. For now, it appears in check – however, another big shadow into that zone could embolden the supply side and strike doubt into the demand-side.

The long term trend ribbon and 103-105.75 are now demand, the short term uptrend remains intact until a close below these.

In summary: Yes, the iron ore price trends are clearly changing, but one more confirmation would be ideal.

Economy

Today

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

Later this week

Monday

• ALL DAY: AUS and CNY holidays

Tuesday

• 10:30 AUS Westpac Consumer Sentiment October (-0.5% in September)

• 11:30 AUS:

  • RBA September meeting minutes

  • ANZ Job Ads September (-2.1% m/m in August)

  • NAB Business Confidence September (-4 in August)

Wednesday

• N/a

Thursday

• 05:00 USA Federal Reserve September FOMC Meeting minutes

• 23:30 USA Core CPI September (+0.2% m/m for 3.1% p.a. forecast vs +0.3% m/m for 3.2% p.a. in August)

Friday

• 23:30 USA Core PPI September (+0.2% m/m for 2.5% p.a. forecast vs +0.3% m/m for 2.5% p.a. in August)

Saturday

• 01:00 USA Prelim UoM Consumer Sentiment September (70.5 forecast vs 70.1 August)

Latest News

Interesting Movers

Trading higher

• +45.7% Arcadium Lithium (LTM) - Rio Tinto (RIO) in talks to acquire the lithium miner, so far LTM board has deemed the $4-6B valuation as opportunistic and inadequate (despite being roughly double the stock's September low of $3.32 prior to the CATL mine closure announcement!)

• +21.7% Brainchip (BRN) - No lithium, and no news either. But, see today's ChartWatch for discussion of how the long term trend changes - it has officially changed to up here using my model! Rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +21.2% Wildcat Resources (WC8) - No news, got swept up in LTM's takeover wake, still hardly a blip here compared to overall losses from 2023 peak, closed off the highs of the session and below the long term downtrend ribbon, another blow to the shorts perhaps

• +18.9% Liontown Resources (LTR) - Ditto LTM takeover wake, but a far more emphatic close / demand-side candle logged today has confirmed a new short-term uptrend - for the first time since May, still down over 40% from the May peak, worth looking at what happened at the LT downtrend ribbon back then!

• +12.9% Sayona Mining (SYA) - Ditto LTM takeover wake, also a new short-term uptrend confirmed here, but the long-term trend remains firmly down, super interesting technicals as with many ASX lithium stocks now!

• +9.5% Vulcan Energy Resources (VUL) - Ditto LTM takeover wake, but unlike the others so far, actually showing a short and long-term uptrend, strong and emphatic demand-side showing today (that's why it's been featured regularly in ChartWatch Scans Uptrends lists) 🔎📈

• +8.7% Core Lithium (CXO) - Ditto LTM takeover wake, similar to SYA, there's a few fledgling short-term uptrends in the sector now, but again, about to bash into the long-term downtrend ribbon…

• +7.6% Bravura Solutions (BVS) - No lithium, and no news either…just a wonderful demand-side candle that is entirely consistent with prevailing short and long-term uptrends (that's why it's been featured regularly in ChartWatch Scans Uptrends lists) 🔎📈

• +6.8% Life360 (360) - No news…just a wonderful demand-side candle that is entirely consistent with prevailing short and long-term uptrends, another ChartWatch Scans Uptrends lists regular! 🔎📈

• +6.4% Magellan Financial Group (MFG) - No news, upgraded to neutral from underperform at Macquarie and price target increased to A$9.50 from A$9.45. Strong demand-side candle today, rise is consistent with prevailing short and long-term uptrends also (recently appearing in ChartWatch Scans Uptrends lists) 🔎📈

• +5.9% Zip Co. (ZIP) - No news, another ChartWatch Scans Uptrends lists regular! 🔎📈

• +5.6% Iperionx (IPX) - No news…just a wonderful demand-side candle that is entirely consistent with prevailing short and long-term uptrends, another ChartWatch Scans Uptrends lists regular! 🔎📈

• +5.3% Opthea (OPT) - No news…just a wonderful demand-side candle that is entirely consistent with prevailing short and long-term uptrends, another ChartWatch Scans Uptrends lists regular! 🔎📈

• +4.8% Lovisa (LOV) - No news…just a wonderful demand-side candle that is entirely consistent with prevailing short and long-term uptrends, another ChartWatch Scans Uptrends lists regular! 🔎📈

• +4.6% Mineral Resources (MIN) - Ditto LTM takeover wake, what a miracle here! CATL mines shutdown, China stimulus (plus a separate announcement for more to come), plus industry takeover…makes you wonder where it would have been without these events! Hardly an emphatic close here, also struggling with the long-term downtrend ribbon.

• +4.3% Nuix (NXL) - No news…just a wonderful demand-side candle that is entirely consistent with prevailing short and long-term uptrends, another ChartWatch Scans Uptrends lists regular! 🔎📈

Trading lower

• -19.5% West African Resources (WAF) - Burkina Faso Operations Update. This, ladies and gentlemen investors, is why it is often better to buy bullion or a gold ETF instead of trying to pick the No 1 ASX gold stock!

• -4.3% Fisher & Paykel Healthcare Corporation (FPH) - No news, short term downtrend confirmed.

• -4.0% Deep Yellow (DYL) - No news.

• -3.1% Vault Minerals (VAU) - No news, fall is consistent with prevailing short and long-term downtrends 🔎📉

• -3.1% GQG Partners (GQG) - FUM as at 30 September 2024

Broker Notes

• Abacus Group (ABG)

  • Retained at accumulate at Ord Minnett; Price Target: $1.35

• AGL Energy (AGL)

  • Retained at neutral at Goldman Sachs; Price Target: $11.30

  • Retained at buy at Ord Minnett; Price Target: $13.80 from $13.70

• Ampol (ALD)

  • Retained at neutral at Goldman Sachs; Price Target: $35.60

• AMP (AMP)

  • Retained at accumulate at Ord Minnett; Price Target: $1.45

• APA Group (APA)

  • Retained at accumulate at Ord Minnett; Price Target: $8.60

• Arena Reit. (ARF)

  • Retained at accumulate at Ord Minnett; Price Target: $4.40

• Abacus Storage King (ASK)

  • Retained at buy at Ord Minnett; Price Target: $1.50

• ASX (ASX)

  • Retained at sell at Goldman Sachs; Price Target: $59.50 from $59.00

• BHP Group (BHP)

  • Downgraded to neutral from buy at Jefferies; Price Target: $49.20 from $54.00

• Beach Energy (BPT)

  • Retained at sell at Goldman Sachs; Price Target: $1.44

  • Retained at buy at Ord Minnett; Price Target: $1.65

• Bluescope Steel (BSL)

  • Retained at buy at Citi; Price Target: $23.00

• Challenger (CGF)

  • Retained at buy at Ord Minnett; Price Target: $7.95

• Charter Hall Group (CHC)

  • Retained at hold at Ord Minnett; Price Target: $15.00

• Centuria Industrial Reit (CIP)

  • Retained at accumulate at Ord Minnett; Price Target: $3.35

• Centuria Capital Group (CNI)

  • Retained at hold at Ord Minnett; Price Target: $2.00

• Cooper Energy (COE)

  • Retained at neutral at Goldman Sachs; Price Target: $0.25

• Charter Hall Social Infrastructure Reit (CQE)

  • Retained at buy at Ord Minnett; Price Target: $3.15

• Carnarvon Energy (CVN)

  • Retained at buy at Ord Minnett; Price Target: $0.21

• Dexus (DXS)

  • Retained at buy at Ord Minnett; Price Target: $8.25

• Evolution Mining (EVN)

  • Retained at Morgan Stanley; Price Target: $4.25

• Goodman Group (GMG)

  • Retained at accumulate at Ord Minnett; Price Target: $35.00

• Gowing Bros (GOX)

  • Retained at buy at Ord Minnett; Price Target: $3.00

• GPT Group (GPT)

  • Retained at accumulate at Ord Minnett; Price Target: $5.10

• HMC Capital (HMC)

  • Retained at sell at Ord Minnett; Price Target: $6.50

• Insurance Australia Group (IAG)

  • Retained at buy at Ord Minnett; Price Target: $8.40

• Karoon Energy (KAR)

  • Retained at buy at Goldman Sachs; Price Target: $2.20

  • Retained at buy at Ord Minnett; Price Target: $2.40

• Magellan Financial Group (MFG)

  • Retained at neutral at Goldman Sachs; Price Target: $10.10 from $10.00

  • Upgraded to neutral from underperform at Macquarie; Price Target: $9.50 from $9.45

• Mirvac Group (MGR)

  • Retained at hold at Ord Minnett; Price Target: $2.15

• National Storage Reit (NSR)

  • Retained at hold at Ord Minnett; Price Target: $2.50

• Northern Star Resources (NST)

  • Retained at Morgan Stanley; Price Target: $14.35

• Origin Energy (ORG)

  • Retained at buy at Goldman Sachs; Price Target: $10.75

  • Retained at buy at Ord Minnett; Price Target: $11.20

• Region Group (RGN)

  • Retained at accumulate at Ord Minnett; Price Target: $2.35

• Regis Resources (RRL)

  • Retained at Morgan Stanley; Price Target: $2.05

• Scentre Group (SCG)

  • Retained at accumulate at Ord Minnett; Price Target: $3.90

• Steadfast Group (SDF)

  • Retained at buy at Ord Minnett; Price Target: $7.15

• Stockland (SGP)

  • Retained at hold at Ord Minnett; Price Target: $5.15

• The Star Entertainment Group (SGR)

  • Downgraded to reduce from hold at Morgans; Price Target: $0.22

• SKS Technologies Group (SKS)

  • Initiated at add at Morgans; Price Target: $1.80

• Santos (STO)

  • Retained at buy at Goldman Sachs; Price Target: $8.65

  • Retained at buy at Ord Minnett; Price Target: $8.40

• Strike Energy (STX)

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

• Suncorp Group (SUN)

  • Retained at accumulate at Ord Minnett; Price Target: $19.65

• Vicinity Centres (VCX)

  • Retained at accumulate at Ord Minnett; Price Target: $2.40

• Viva Energy Group (VEA)

  • Retained at buy at Goldman Sachs; Price Target: $3.60

  • Retained at buy at Ord Minnett; Price Target: $3.70

• Woodside Energy Group (WDS)

  • Retained at neutral at Goldman Sachs; Price Target: $31.70

  • Retained at hold at Ord Minnett; Price Target: $26.00

Scans