Evening Wrap: ASX 200 recovery continues as JB Hi-Fi, Car Group pop on earnings, Beach Energy, lithium stocks lead resources lower

Last week we had two major missteps backwards, and since and including today, it's been a series of small steps forward.

The current rally, although encouraging, still has a long way to go to reaffirm investors confidence that the Australian stock market deserves to again trade at new highs in the near future.

Each gain will help in this process...and in this evening's ChartWatch we review each of the other key puzzle pieces you must monitor from now to help keep your portfolio safe. 🧩🧩🧩

Apart from that, there's the usual in depth analysis of every major move – good or bad – in Aussie shares today...so on that note...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 36.0 points higher at 7,813.7, 0.46% from its session low and 0.30% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by a solid 174 to 88.

The Information Technology (XIJ) (+1.9%) sector was the best performing sector today, likely in response to a strong gain in Dicker Data (ASX: DDR) after it announced its half-year dividend ahead of its results due on 30 August. It was also good to see nice gains in ChartWatch ASX Scans Uptrends List regulars Codan (ASX: CDA), Catapult Group International (ASX: CAT), and Technology One (ASX: TNE).

Also doing well today, was the Consumer Discretionary (XDJ) (+1.9%) sector. It benefited from a 8.3% pop in JB HI-FI (ASX: JBH) following the company’s release of its FY24 results. There were strong performances elsewhere, with other discretionary retailers Super Retail Group (ASX: SUL), Harvey Norman (ASX: HVN), Premier Investments (ASX: PMV), and Nick Scali (ASX: NCK) also nicely in the green.

Other market beating sectors include Communication Services (XTJ) (+1.1%) (mainly due to a +4.5% in Car Group (ASX: CAT) following its results), the Gold (XGD) (+1.9%) sub-index, and Financials (XFJ) (+0.86%).

The best stocks from the “Market Beating” sectors today

The rest of the sectors muddled along somewhere around market performance, but there were two notable laggards – well, serial laggards you’d call them. No prizes for guessing who they are…Resources (XJR) (-0.61%) and Energy (XEJ) (-0.50%) were the only two sectors in the red today.

A combination of a weaker iron ore price, lithium carbonate prices hitting 3 ½ year lows in China, and a very poorly received FY24 result from Beach Energy (ASX: BPT), each did it’s fair share of damage across the two sectors respectively.

ASX Resources and Energy stocks did it tough again today, the worst of the two sectors…

ChartWatch

Nikkei 225 Index (Japan)

Doesn't look good for a recovery above ST/LT trend ribbons...

The last time we covered the Nikkei 225 was in ChartWatch in the Evening Wrap on 5 August.

It’s been a week since the last time we checked up on the Nikkei, but really more specifically, the carry trade. To learn more about the carry trade and it’s potential impact on global markets, check out this article I wrote about it.

The quickest summary I can give you here is: Carry trade switched to "off" equals a great big hoovering up of global liquidity. The giant Japanese pension funds will be selling non-Japanese assets and repatriating the cash, favouring now higher yielding and risk free Japanese Government Bonds (JGBs).

This will likely show up as:

• The Yen appreciating against key funding currencies like the AUD and USD

• Falling yields on JGBs in the interim as Japanese funds hoover them up (that is, until you may see them pop up on the next bit of hawkish Bank of Japan rates news)

• Falling stock and bond markets in countries of key funding currencies, but also the Nikkei as Japanese stocks fall on the one-two punch of higher yielding JGBs and the rising Yen

The opposite is also true. If the carry trade is “healing” – because there’s still positive carry, that is, there’s still money to be made between the still-substantial differential between yields in Japan and everywhere else – we should see:

• Yen depreciation

• Rising JBG yields

• Rising stock and bond markets

Since last week’s initial calamity (see ~8,500 point fall on the Nikkei 1, 2, and 5 August!), we’ve largely seen Scenario 2 – i.e., the good one! 👍

But! I do note the Nikkei rally, along with rallies in AUDJPY and USDJPY have been modest compared to the declines, as well as showing slowing momentum over the last few trading sessions.

AUDJPY chart (above top), USDJPY chart (above centre), and 2-Year JGB Yield chart (above bottom)

By showing you these charts, I hope to provide you with the relevant key pieces of the puzzle* you’ll need to track whether the carry trade is in the process of resuming, or if this is just the calm before the next unwind storm (*along with the S&P/ASX 200 chart below, and the Nasdaq Composite Index chart we also regularly cover here in ChartWatch).

As always, the candles, price action and trend ribbons will guide us. We want to see continued white bodies and or downward pointing shadows, a return to rising peaks and rising troughs, as well as the trend ribbons returning to providing dynamic demand. The opposite would signal trouble – to say the least! ⚠️

For the Nikkei chart above, the key zone of supply is clearly the confluence of the short and long term trend ribbons. If this area cannot be recovered soon – that is, if it begins to offer dynamic supply in the form of black candles and upward pointing shadows – the Nikkei’s transition to long term downtrend will be confirmed. The same can be said respectively for the AUDJPY and USDJPY.

S&P/ASX 200 (XJO)

An interesting chart

The last time we covered the XJO was in ChartWatch in the Evening Wrap on 6 August.

In that update, we were hoping for a decent bounce in US stocks, particularly the NASDAQ, to signal the buy-the-dippers are still around.

With respect to the NASDAQ chart (not shown), after a very disturbing black candle on Wednesday 7 August, it’s been an encouraging recovery.

There’s still a long way to go there and here on the XJO, including a requisite return to risking peaks and rising troughs, and a close above the dynamic supply of the short term downtrend ribbon.

For the XJO, that means a close above 7850 (short term trend ribbon), but preferably also above the 7861 static point of supply.

Of continuing concern:

• It’s taken us 5 candles to close above the balance point (midpoint = 7789) of the major supply candle of 5-Aug (hey at least we’ve done it), and we’re yet to recover above the balance point of the 8149-7628 decline (= 7889). Think of the balance point of a major demand or supply candle as a consensus point. A close above/below this point generally signals the consensus is changing. We want to see the consensus swing back to demand-side control.

• The long term trend ribbon has neutralised – this is the first time it’s done so since this last phase of the bull market began back in January.

• The 8149-7628 move is just such a big volatility event and demonstrative of supply-side control. It’s like a big scar on the bull market. It’s not a good look, it will likely take some time and significant effort from the demand-side to heal.

Key levels are straight forward: We don't want to see a close below 7628, but particularly 7601 as it now coincides with the long term trend ribbon.

Looking up, ideally we knock that close above 7889 quickly. If it occurs with strong demand-side candles and a return to good price action – then we’re an excellent chance to reclaim the 8149 high.

If not, the best case scenario is likely another long and protracted trading range beneath it – of the likes we experienced for months below the previous 7911 high. 😭

Economy

Today

• CHN New Loans July & M2 Money Supply July

  • New Loans: vs 1,280 billion forecast and 2,130 billion June

  • M2 Money Supply: vs 6.0% forecast and 6.2% June

Later this week

Tuesday

• 10:30 AUS Westpac Consumer Sentiment July (-1.1% in June)

• 11:30 AUS Wage Price Index q/q June (+0.9% forecast vs +0.8% March)

• 11:30 AUS NAB Business Confidence Survey July (4 in June)

• 22:30 USA Core Producer Price Index (PPI) m/m July (+0.2% m/m and +2.4% p.a. forecast vs +0.4% m/m and +2.6% p.a. June)

Wednesday

• 22:30 USA Core Consumer Price Index (CPI) m/m July (+0.2% m/m and +3.4% p.a. forecast vs +0.1% m/m and +3.4% p.a. June)

Thursday

• 11:30 AUS Employment Change & Unemployment Rate July

  • Employment Change: +20,400 forecast vs +50,200 in June

  • Unemployment Rate: 4.1% forecast vs 4.1% in June

• 12:00 CHN Data Dump July

  • Industrial Production y/y +5.3% forecast vs +5.3% June

  • Retail Sales y/y +2.6% forecast vs +2.0% June

  • Fixed Asset Investment ytd/y +3.9% forecast vs +3.9% June

  • Unemployment Rate +5.1% forecast vs +5.0% June

  • New Home Prices m/m -0.65% forecast vs -0.67% June

• 22:30 USA Core Retail Sales July (+0.1% m/m vs +0.4% m/m June)

Friday

• 09:30 AUS RBA Governor Michell Bullock Speaks

Saturday

• 00:00 USA University of Michigan Consumer Sentiment Index August (66.7 forecast vs 66.4 July)

Latest News

Interesting Movers

Trading higher

• +14.5% Talga Group (TLG) - Change in substantial holding (increase), but also Friday's Talga Group Ltd Prospectus Offer

• +10.0% Avita Medical (AVH) - Continued positive response to Friday's AVITA Medical Reports Second Quarter Financial Results, upgraded to buy from hold at Bell Potter and price target increased to $3.60 from $3.20

• +9.2% Westgold Resources (WGX) - No news, rise is consistent with prevailing short and long term uptrends (a regular in ChartWatch Uptrends) 🔎📈

• +9.1% Lotus Resources (LOT) - Lotus Enhances Management Team, generally stronger day for ASX uranium stocks

• +8.3% JB HI-FI (JBH) - Appendix 4E and Annual Report - 2024 and Results Presentation - 2024 Full Year Results, rise is consistent with prevailing short and long term uptrends (a regular in ChartWatch Uptrends) 🔎📈

• +8.0% Tabcorp (TAH) - No news, reports next Tues

• +5.5% Spartan Resources (SPR) - No news, rise is consistent with prevailing short and long term uptrends (a regular in ChartWatch Uptrends) 🔎📈

• +5.4% Bellevue Gold (BGL) - Change of Director's Interest Notice (S Coates) and Change of Director's Interest Notice (F Robertson) (2 x on market purchase of shares)

• +5.0% Dicker Data (DDR) - Dividend/Distribution

• +5.0% Super Retail Group (SUL) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.9% Cettire (CTT) - No news, small bounce compared to 80% wipe out since March

• +4.9% Adriatic Metals (ADT) - Change of Director's Interest Notice - Michael Rawlinson (on market purchase)

• +4.7% Codan (CDA) - No news, rise is consistent with prevailing short and long term uptrends (a regular in ChartWatch Uptrends) 🔎📈

• +4.5% Botanix Pharmaceuticals (BOT) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.5% Polynovo (PNV) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.5% Car Group (CAR) - Appendix 4E and Annual Report 2024 and FY24 Results Presentation, rise is consistent with prevailing long term uptrend 🔎📈

• +4.2% Nexgen Energy (NXG) - No news, generally stronger day for ASX uranium stocks

• +4.2% Catapult Group International (CAT) - No news, rise is consistent with prevailing short and long term uptrends (a regular in ChartWatch Uptrends) 🔎📈

• +3.9% Supply Network (SNL) - No news, rise is consistent with prevailing short and long term uptrends (a regular in ChartWatch Uptrends) 🔎📈

Trading lower

• -12.6% Beach Energy (BPT) - 2024 Beach Energy Ltd Annual Report and Beach Energy Ltd FY24 Results Presentation, fall is consistent with prevailing short and long term downtrends (a regular in ChartWatch Downtrends) 🔎📉

• -8.8% Aurizon (AZJ) - FY2024 Results and Buyback Announcement and Full year results presentation, fall is consistent with prevailing short and long term downtrends (a regular in ChartWatch Downtrends) 🔎📉

• -5.6% Strike Energy (STX) - No news, fall is consistent with prevailing short and long term downtrends (a regular in ChartWatch Downtrends) 🔎📉

• -4.5% Jupiter Mines (JMS) - No news, fall is consistent with prevailing short term downtrend, falling peaks and falling troughs, long term trend is transitioning from up to down 🔎📉

• -4.2% Core Lithium (CXO) - No news, fall is consistent with prevailing short and long term downtrends (a regular in ChartWatch Downtrends) 🔎📉

• -3.8% Mineral Resources (MIN) - No news, lithium carbonate price hit 3 1/2 year lows in China, other lithium minerals prices also plumbing significant lows…(a regular in ChartWatch Downtrends)

• -2.9% Pilbara Minerals (PLS) - No news, lithium carbonate price hit 3 1/2 year lows in China, other lithium minerals prices also plumbing significant lows…(a regular in ChartWatch Downtrends)

Broker Notes

Life360 (360)

• Retained at buy at Bell Potter; Price Target: $20.50 from $19.00

• Retained at overweight at Morgan Stanley; Price Target: $20.50 from $19.00

• Retained at buy at Ord Minnett; Price Target: $19.28 from $16.42

29METALS (29M)

• Retained at neutral at Macquarie; Price Target: $0.37 from $0.43

Aeris Resources (AIS)

• Retained at outperform at Macquarie; Price Target: $0.23 from $0.26

ALS (ALQ)

• Upgraded to buy from hold at Jefferies; Price Target: $17.40 from $13.20

Aurelia Metals (AMI)

• Retained at outperform at Macquarie; Price Target: $0.27 from $0.28

AMP (AMP)

• Downgraded to accumulate from buy at Ord Minnett; Price Target: $1.40 from $1.25

Avita Medical (AVH)

• Upgraded to buy from hold at Bell Potter; Price Target: $3.60 from $3.20

• Retained at add at Morgans; Price Target: $4.56 from $5.60

Aurizon (AZJ)

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

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

Bellevue Gold (BGL)

• Retained at outperform at Macquarie; Price Target: $1.70 from $2.10

BHP Group (BHP)

• Retained at neutral at Macquarie; Price Target: $42.00 from $43.00

Beach Energy (BPT)

• Retained at sell at Citi; Price Target: $1.30

Car Group (CAR)

• Retained at buy at Citi; Price Target: $39.30

• Retained at outperform at Macquarie; Price Target: $34.60

Charter Hall Group (CHC)

• Retained at buy at Citi; Price Target: $13.50

Centuria Industrial Reit (CIP)

• Retained at buy at UBS; Price Target: $3.55

Charter Hall Long Wale Reit (CLW)

• Retained at neutral at Citi; Price Target: $3.70 from $3.50

Carnaby Resources (CNB)

• Retained at outperform at Macquarie; Price Target: $0.88 from $1.00

Capstone Copper Corp. (CSC)

• Retained at outperform at Macquarie; Price Target: $12.40 from $13.10

Droneshield (DRO)

• Upgraded to buy from hold at Bell Potter; Price Target: $1.25 from $1.60

Evolution Mining (EVN)

• Retained at outperform at Macquarie; Price Target: $4.30 from $4.40

Iluka Resources (ILU)

• Retained at neutral at UBS; Price Target: $7.05

JB HI-FI (JBH)

• Retained at buy at Citi; Price Target: $74.00

James Hardie Industries (JHX)

• Retained at add at Morgans; Price Target: $55.65

Light & Wonder (LNW)

• Retained at accumulate at Morgans; Price Target: $180.00

Nick Scali (NCK)

• Retained at buy at Citi; Price Target: $16.53 from $17.30

• Retained at buy at Jarden; Price Target: $16.52 from $15.40

• Retained at outperform at CLSA; Price Target: $18.00 from $18.50

• Retained at outperform at Macquarie; Price Target: $16.10

Newmont Corporation (NEM)

• Retained at outperform at Macquarie; Price Target: $86.00

News Corporation (NWS)

• Retained at overweight at Morgan Stanley; Price Target: $47.70

• Retained at neutral at UBS; Price Target: $47.10 from $46.30

• Retained at positive at E&P; Price Target: $48.50 from $47.20

• Retained at overweight at JP Morgan; Price Target: $52.00

Patriot Battery Metals (PMT)

• Initiated at buy at Bell Potter; Price Target: $0.80

Premier Investments (PMV)

• Retained at buy at Bell Potter; Price Target: $35.00

QBE Insurance Group (QBE)

• Retained at buy at Citi; Price Target: $19.30 from $20.00

• Retained at neutral at Macquarie; Price Target: $16.90 from $18.40

• Retained at overweight at Morgan Stanley; Price Target: $19.30 from $19.85

• Retained at accumulate at Morgans; Price Target: $18.73 from $19.76

• Retained at hold at Ord Minnett; Price Target: $19.00

• Retained at buy at UBS; Price Target: $20.00 from $20.50

• Retained at overweight at JP Morgan; Price Target: $21.00

• Retained at buy at Jefferies; Price Target: $19.35 from $19.95

REA Group (REA)

• Downgraded to sell from underweight at Jarden; Price Target: $164.00 from $161.00

• Retained at hold at Jefferies; Price Target: $222.40 from $200.45

• Retained at buy at UBS; Price Target: $232.20 from $233.60

• Retained at outperform at Macquarie; Price Target: $219.00 from $210.00

• Retained at hold at Morgans; Price Target: $197.00 from $178.00

• Retained at buy at Bell Potter; Price Target: $223.00 from $218.00

• Retained at overweight at Morgan Stanley; Price Target: $220.00

Ramsay Health Care (RHC)

• Retained at add at Morgans; Price Target: $56.54 from $60.76

Rio Tinto (RIO)

• Retained at neutral at Macquarie; Price Target: $117.00 from $118.00

South32 (S32)

• Retained at outperform at Macquarie; Price Target: $3.95 from $4.00

Sandfire Resources (SFR)

• Retained at outperform at Macquarie; Price Target: $9.40 from $10.00

Stockland (SGP)

• Retained at overweight at Morgan Stanley; Price Target: $5.30

Scans