Evening Wrap: ASX 200 hits pause, but good gains in lithium and energy

The S&P/ASX 200 closed 5.1 points lower, down 0.07%.

It was a modest pull back for the S&P/ASX 200 today, but it wasn't all doom and gloom. Ahem, lithium bulls, may I have your attention please! There's the tiniest of chart signals that the low in lithium minerals prices might be in. ASX lithium stocks certainly thought so, some big gains there - and energy stocks staged their own stunning recovery as a rumour Woodside and Santos may be about to merge did the rounds.

Let's dive in.

Markets

ASX 200 Session Chart

Aussie investors were buying a stairway to heaven today!

The S&P/ASX200 (XJO) finished 5.1 points lower at 7,173.3, 0.3% from its session low and just 0.1% from its high. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 122 to 151.

Utilities (XUJ) +0.8%, Materials (XMJ) +0.6%, Energy (XEJ) +0.3%, and Information Technology (XIJ) +0.1% were the only major ASX 200 sectors closing in the black today.

Within Materials, lithium stocks enjoyed their second day of gains. Yesterday's gains were somewhat opaque (read this article for a possible reason), but today's gains occurred for a very clear reason: GFEX Lithium Carbonate futures are currently trading limit up.

GFEX Lithium Carbonate Futures January 2024 contract. Source: SMM

This means trading has been halted as a result of the daily gain reaching the exchange mandated maximum of 7%. Again, check the above article for a discussion of whether we've seen the much anticipated low in lithium minerals prices from a technical perspective.

Either way, I'll follow up tomorrow with a review of lithium sector stock charts. If there's a lithium stock chart you would like me to analyse, let me know!

Lithium stocks may be about to shake off their annus horribilis

The biggest swing in any sector today occurred in the S&P/ASX 200 Energy Sector (XEJ), which was down 2.5% in early trading. Major reversals in Woodside Energy (ASX: WDS) +0.4% and Santos (ASX: STO) +0.7% were largely to blame for the change in fortunes, as a rumour circulated in the media the two may be considering a merger.

The early Energy Sector doldrums were due to another sharp fall in the West Texas Intermediate Crude Oil price. We've been tracking it very closely in the Evening Wrap over the last couple of weeks, and I've been warning of some potentially bearish technical signals developing. It looks like these signals came to a head yesterday, and the result is another sharp sell off in WTI.

WTI Crude Oil appears to have made its decisive move

The short-and-long term trends for WTI are well-set, and rolling to the downside respectively. Regular black candles are a sign of consistent excess supply, and as previously suggested, the break of $72.37 proved decisive.

Going forward, I would watch for demand to potentially return in the zone between the 4 May low of $63.64 and the 12 Jun low of $66.80. White candles and long downward pointing shadows are the reliable signs of excess demand you want to watch out for there.

The 16 Nov low of $72.37 now moves to supply, and I remain bearish while the price remains below $72.37-$73.79 (i.e., the 22 Nov low).

Oh, the frustrations of investing in commodity companies!

Economy

Finally, some good news on the Chinese economy. A surprise increase in exports helped drive an improvement in the country’s trade surplus to US$68.39 billion in November, up from October’s US$56.53 billion.

Exports improved 0.5%, which doesn’t sound like much, but it was well ahead of the 6.4% contraction logged in October, and ahead of economists’ forecasts for a 1.1% decline. Chinese exports are generally seen as good indicator of global economic growth given the Chinese economy remains heavily export focused - so this was good news for markets today.

Australia’s trade data for October was also released today, and it also showed an improvement in the local economy’s trade performance. Australia’s trade surplus widened to A$7.13 billion from September’s A$6.79 billion. The result was below economists’ forecasts of A$7.5 billion, though.

What to watch out for...

There are no major economic announcements scheduled for release this evening.

Latest News

Interesting Movers

Trading higher

• +25.0% Zip Co. (ZIP) - Several broker price target upgrades

• +9.3% Atlantic Lithium (A11) - No news

• +7.6% Syrah Resources (SYR) - GFEX Lithium Carbonate futures traded limit up, broad sector rally

• +7.2% Infomedia (IFM) - No news

• +6.7% Perpetual (PPT) - Rejected takeover offer from Washington H. Soul Pattinson (SOL)

• +6.5% Grange Resources (GRR) - No news

• +6.5% Centuria Capital Group (CNI) - No news

• +6.4% Beacon Lighting Group (BLX) - No news

• +6.3% Fineos Corporation Holdings (FCL) - No news since 05-Dec Chair's Address to Shareholders

• +6.1% Boart Longyear Group (BLY) - No news

• +6.0% Judo Capital Holdings (JDO) - No news

• +5.7% Macmahon Holdings (MAH) - No news

• +5.6% Terracom (TER) - Modest rally in Newcastle coal futures

• +5.0% Pilbara Minerals (PLS) - GFEX Lithium Carbonate futures traded limit up, broad sector rally

Trading lower

• -8.0% Boss Energy (BOE) - Placement to fund acquisition of US uranium assets

• -6.5% MMA Offshore (MRM) - Weaker oil price

• -6.0% Paladin Energy (PDN) - Uranium sector correction

• -5.6% Core Lithium (CXO) - No news - conspicuous from lithium sector rally!

• -5.3% Brainchip Holdings (BRN) - No news

• -5.2% Lotus Resources (LOT) - Uranium sector correction

• -5.1% Imdex (IMD) - No news

• -5.0% Select Harvests (SHV) - No news

• -4.5% Resolute Mining (RSG) - No news, continued gold sector pullback

Broker Notes

• Aeris Resources (AIS) retained at buy Bell Potter; Price Target: $0.23 from $0.30

• Bank of Queensland (BOQ) retained at underperforrm Morgan Stanley; Price Target: $5.30

• CSL (CSL) retained at buy Citi; Price Target: $325.00

• Endeavour Group (EDV)

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

  • Retained at buy UBS; Price Target: $6.00

  • Retained at buy Goldman Sachs; Price Target: $6.40

• Evolution Mining (EVN)

  • Downgraded to equal-weight from overweight at Morgan Stanley; Price Target: $4.50

  • Retained at buy Goldman Sachs; Price Target: $3.80

• IGO (IGO) retained at neutral Citi; Price Target: $9.50 from $13.00

• Magellan Financial Group (MFG) retained at neutral Citi; Price Target: $7.00

• Macquarie Group (MQG) downgraded to neutral from buy at UBS; Price Target: $185.00 from $180.00

• Neuren Pharmaceuticals (NEU) downgraded to hold from buy at Bell Potter; Price Target: $17.50

• Perpetual (PPT)

  • Retained at overweight Morgan Stanley; Price Target: $28.00

  • Retained at neutral Citi; Price Target: $25.65

• Rio Tinto (RIO)

  • Retained at overweight Morgan Stanley; Price Target: $134.50

  • Retained at neutral UBS; Price Target: $115.00

  • Retained at buy Goldman Sachs; Price Target: $137.70

• Xero (XRO) retained at buy Citi; Price Target: $129.40

• Zip Co. (ZIP) retained at neutral Citi; Price Target: $0.51 from $0.46

Scans