Evening Wrap: ASX 200 sees minor blip lower as defence stocks soar and lithium stocks begin to flex muscles

The S&P/ASX 200 closed 12.3 points lower, down 0.14%.

A sliver of a loss for Aussie shares today, but I doubt many investors noticed – as there was likely very little change in the value their portfolios. More likely, with roughly two stocks rising for each decliner, they probably found their portfolio’s largely kept chugging along.

Defence and lithium stocks were of particular note today as most sectors gained. Healthcare and Financials (the latter dragged down by disappointing earnings from exchange operator ASX) were the main laggards.

To make sense of all the above, I have detailed technical analysis on the Nasdaq Composite, S&P/ASX 200, and GFEX Lithium Carbonate Futures in today's ChartWatch.

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 the key economic data in tonight's Evening Wrap.

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 12.3 points lower at 8,831.4, 0.15% from its session low and smack–bang at the mid-point of the session's range. Despite the minor slide in the benchmark, the broader-based S&P/ASX 300 (XKO) likely told the real story with advancers beating decliners by 186 to 92.

6 major ASX sectors up today (let’s call it 7 with the Gold Sub-Index (XGD) (+1.2%)) versus 5 down. The worst of those downs was Healthcare (XHJ) (-1.2%), and that was mainly two stocks – Resmed (RMD) (-2.1%) and CSL (CSL) (-1.5%), and then there was Financials (XFJ) (-0.3%), which was largely due to an earnings miss from exchange operator ASX (ASX) (-8.6%).

The point – with roughly two stocks gaining for each decliner – it was a pretty mild pullback.

Consumer Discretionary (XDJ) (+0.9%), Technology (XIJ) (+0.4%), Real Estate (XPJ) (+0.4%), Resources (XJR) (+0.2%), and Energy (XEJ) (+0.2%) largely kept chugging along.

The only really interesting stuff that caught my eye today was the continued surge in defence stocks like Electro Optic Systems (EOS) (+11.%), and Elsight (ELS) (+10%) – both ChartWatch ASX Scans darlings (you're welcome), and an inkling of a restart of the recent rally in lithium stocks. The latter, led by Pilbara Minerals (PLS) (3.8%), was sparked by a sharp rise in GFEX lithium carbonate futures.

Naturally, I have detailed technical analysis (in ChartWatch below) and fundamental analysis for you (via today’s article on the topic).

Today's best blue chip gainers

Today's worst blue chip losers

ChartWatch

NASDAQ Composite Index

An interesting chart (click here for full size image)

The leopard can’t change its spots, and a zebra can’t change its…??? 🦓

The last 4 trading sessions have seen alternating credible demand/supply showings: ⬛⬜⬛⬜. The “zebra” pattern!

Q: What about tonight, what kind of candle should be expect? 🤔

A: More often than not (“MOTN”) given the circumstances, i.e., broadly strong demand-side technicals, and the fact the last candle was a very, very decent demand-side showing…you have to say: ⬜.

That’s what the probabilities favour, but they zebra may have other ideas!

The recent pattern of candles is odd (particularly given last Thur-Fri clear supply-side move), but it’s not impossible. When volatility is up, it tells us there are competing views among market participants, and days where one view clearly wins out over the other. Also, that neither view is going away.

It’s not exactly the consensus we’d love (i.e., all demand-side candles or all supply-side candles), so we must simply focus on the underlying trends, favour the outcome they imply, and be watchful for telltale price action at critical pressure points.

What are these critical pressure points?

21458 is the main game to the upside. It should be viewed and respected as a credible potential point of supply. In theory, we should see some form of supply response there (i.e., black-bodied candles and or upward pointing shadows). The magnitude of this response will tell us how much we’ll need to be concerned – i.e., if we see large supply-side candles – or if there isn’t a response – i.e., instead we see white-bodied candles and downward pointing shadows – we’ll know there isn’t much supply at 21458 at all.

20560 is increasingly becoming the main game to the downside. As a credible point of demand, the candles there will help us understand the sustainability of the prevailing short term uptrend. Close below it, and that trend is over.

In between these two critical pressure points, we watch the candles for indication of control versus changing control. A higher trough to 20560 would be constructive for the demand-side control case, while a lower peak to 21458 would be constructive for the supply-side control case.

Conclusion: Last week and on Monday I noted my preference for the Comp / US markets was to cool long exposure, refrain from adding new long exposure, and to be more open to some strategic shorts for protection. Given the candles since, this all still makes sense to me, however assuming now that the cooling is done – I believe sitting pat at present risk levels is sufficient.

S&P/ASX 200 (XJO)

An interesting chart (click here for full size image)

That was what you call a Claytons pullback.

That reference will probably be lost on anyone who doesn’t have a pre-1980 number on their driver's license… but it basically means not a pullback at all.

And a double scotch…for the horse! 🐎

The headline shows a loss, the other market wraps are going to tell you Aussie stocks were down today, but the candles suggest there was nothing but continued demand-side control.

We've had a fantastic 2-day run, but nothing goes up every day, nothing goes up in a straight line.

So, when today's candle is the extent of your “down day”, your “breather”, then it’s a very good sign that there’s very little motivated supply around.

Prices have risen a great deal and yet the supply-side doesn't want a bar of it...clearly also, given the very small pullback today / lack of ability to push further down the previous two days' range, the demand-side is also rock-solid.

Conclusion: This chart remains a picture of demand-side control. 8777 is the nearest point of demand, ideally we don’t see a close below there. The main game is likely still 8630, though, and should the XJO close below there then the short term uptrend is over. Resistance…i.e., points of supply? Nil. Even after today’s piddly pullback!

Lithium Carbonate Futures (Benchmark month, back-adjusted) GFEX

An interesting chart (click here for full size image)

Note that at the time of writing, that last candle is still live (about 30 mins of trade to go). Should it stick, it flags a very credible resumption of demand-side control in the lithium carbonate futures market.

The short term uptrend ribbon appears to have done its job and acted as a zone of dynamic demand, a higher trough at 67140 on 5-Aug to 67040 on 31-Jul is in place, and excess supply at the peak that separates those two troughs (i.e., 70740 on 4-Aug) has been consumed.

Equals we are back to rising peaks and rising troughs – telltale demand-side control price action, with a short term uptrend, decent candles (as of today's showing), BUT with one very major hurdle still to overcome.

The elephant in the corner 🐘 – that monster of a long term downtrend ribbon. For me to declare a new bull market in lithium carbonate has begun, I need to see this ribbon at least neutralised (turn amber), and for the price to close above it. Ideally, I also see at least one trough set in or (preferably) above the long term trend ribbon to indicate that it has transitioned to acting as a zone of excess demand.

Q. Will these criteria be met... and when? 🤔

Hahahaha, no that's prognostication stuff. I can only do: Hey, looks like lithium's in a new bull market folks... after it's happened (if it happens!). 😁

(Conclusion: Lithium is looking a hell of a lot better today than before I went on my holiday. It has a chance to do something it hasn't even looked like doing for the better part of 3-years now. Price action and volume suggest it's a better than warm chance, but let's see. Today's price action firms 67040 as a critical point of demand. The short term uptrend remains intact until a close below there = ⚠️)

Economy

Today

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

Later this week

Thursday

• 21:00 UK Bank of England (BOE) Monetary Policy Statement and Official Cash Rate (-0.25% to 4.0% forecast)

Friday

• 03:01 USA 30-year Bond Yield (4.89% at 2.4x bid-to-cover in July)

Saturday

• 11:30 CHN Consumer Price Index (CPI) and Producer Price Index (PPI) July

  • CPI: -0.1% p.a. forecast vs +0.1% p.a. in June

  • PPI: -3.2% p.a. forecast vs -3.6% p.a. previous

Latest News

Interesting Movers

Trading higher

• +31.9% Eroad (ERD) – EROAD Applauds Push for Smarter Fairer Road User Charging, rise is consistent with prevailing short and long term uptrends 🔎📈

• +20.3% 4DMEDICAL (4DX) – Continued positive response to 31-Jul 4DMedical secures $10m strategic investment from Pro Medicus.

• +17.6% Nanoveu (NVU) – Capital Raise Completion and Nanoveu Accelerates 16nm ECS-DoT Chip Development, rise is consistent with prevailing short and long term uptrends 🔎📈

• +16.9% Ballard Mining (BM1) – No news since 06-Aug Diggers & Dealers Presentation.

• +16.1% Waratah Minerals (WTM) – Continued positive response to 04-Aug Multiple zones of high-grade gold extend Spur Gold Corridor, rise is consistent with prevailing short and long term uptrends, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +12.0% Viridis Mining and Minerals (VMM) – No news, rise is consistent with prevailing short term uptrend and long term trend is transitioning from down to up, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +11.1% Electro Optic Systems (EOS) – No news since 06-Aug N, general strength across the broader Defence sector today, rise is consistent with prevailing short and long term uptrends, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +10.0% Elsight (ELS) – No news, general strength across the broader Defence sector today, rise is consistent with prevailing short and long term uptrends, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +9.2% Falcon Metals (FAL) – Continued positive response to 05-Aug Visible gold in multiple stacked veins at Blue Moon, rise is consistent with prevailing short and long term uptrends 🔎📈

• +9.2% Benz Mining Corp. (BNZ) – No news 06-Aug Benz Mining Diggers and Dealers Presentation, rise is consistent with prevailing short and long term uptrends, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +8.7% Sayona Mining (SYA) – PLL: Updated Closing Timetable for Proposed Merger, general strength across the broader Lithium sector today, rise is consistent with prevailing short term uptrend and long term trend is transitioning from down to up 🔎📈

• +7.8% SKS Technologies Group (SKS) – No news, rise is consistent with prevailing short and long term uptrends, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +7.7% Immutep (IMM) – No news since 05-Aug FDA feedback received for head & neck cancer in CPS below 1.

• +7.3% Coronado Global Resources (CRN) – No news, general strength across the broader Coal sector today, metallurgical coal prices nicely higher overnight.

• +7.1% Predictive Discovery (PDI) – No news, rise is consistent with prevailing short and long term uptrends, a regular in ChartWatch ASX Scans Uptrends list 🔎📈

• +7.1% Alkane Resources (ALK) – Several change of director's interest notifications, rise is consistent with prevailing short and long term uptrends, a recent regular in ChartWatch ASX Scans Uptrends list 🔎📈

Trading lower

• -15.8% Silex Systems (SLX) – $130m Equity Raise and Share Purchase Plan and Release of Shares from Voluntary Escrow.

• -14.5% Trigg Minerals (TMG) – Strategic Critical Mineral Expansion into Tungsten and Response to ASX Price and Volume Query.

• -8.6% ASX (ASX) – FY26 Operating Expense Range Related to ASIC Inquiry $.

• -7.7% Dateline Resources (DTR) – No news 🤔.

• -6.0% Clarity Pharmaceuticals (CU6) – No news 🤔.

• -4.7% GQG Partners (GQG) – No news, fall is consistent with prevailing long term downtrend 🔎📉

• -4.3% Austin Engineering (ANG) – No news, fall is consistent with prevailing long term downtrend 🔎📉

Broker Moves

Aristocrat Leisure (ALL)

• Retained at Outperform at Macquarie; Price Target: $70.00

• Retained at Buy at UBS; Price Target: $72.40

Aurelia Metals (AMI)

• Retained at Buy at Shaw and Partners; Price Target: $0.50

ARB Corporation (ARB)

• Upgraded to Accumulate from Hold at Morgans; Price Target: $38.25 from $35.76

ASX (ASX)

• Retained at Sell at UBS; Price Target: $69.10

Beach Energy (BPT)

• Retained at Hold at Bell Potter; Price Target: $1.25 from $1.35

Breville Group (BRG)

• Retained at Buy at UBS; Price Target: $35.50

BWP Trust (BWP)

• Upgraded to Buy from Neutral at Citi; Price Target: $4.00 from $3.40

• Retained at Buy at UBS; Price Target: $4.10 from $4.16

Centuria Industrial REIT (CIP)

• Retained at Buy at Bell Potter; Price Target: $3.65 from $3.35

• Retained at Neutral at Macquarie; Price Target: $3.29 from $3.22

• Retained at Equal weight at Morgan Stanley; Price Target: $3.31

• Retained at Buy at UBS; Price Target: $3.95 from $3.92

Collins Foods (CKF)

• Retained at Buy at Citi; Price Target: $10.13 from $9.60

Charter Hall Long Wale REIT (CLW)

• Retained at Buy at Citi; Price Target: $4.40

• Upgraded to Neutral from Underweight at JPMorgan; Price Target: $4.30 from $3.90

• Retained at Underperform at Macquarie; Price Target: $3.62 from $3.52

• Retained at Equal-weight at Morgan Stanley; Price Target: $4.50 from $4.55

• Retained at Hold at Ord Minnett; Price Target: $4.20 from $4.10

• Retained at Neutral at UBS; Price Target: $4.55 from $4.33

Gold Road Resources (GOR)

• Retained at Hold at Canaccord Genuity; Price Target: $3.40

Infomedia (IFM)

• Downgraded to Hold from Buy at Bell Potter; Price Target: $1.72 from $1.75

• Downgraded to Neutral from Positive at E&P; Price Target: $1.72 from $1.95

• Downgraded to Hold from Buy at Shaw and Partners; Price Target: $1.72 from $2.10

IperionX (IPX)

• Retained at Speculative Buy at Canaccord Genuity; Price Target: $6.65

Judo Capital Holdings (JDO)

• Retained at Overweight at Morgan Stanley; Price Target: $2.10

James Hardie Industries Plc (JHX)

• Retained at Neutral at Citi; Price Target: $41.50

Light & Wonder Inc. (LNW)

• Retained at Outperform at Macquarie; Price Target: $188.00

• Retained at Buy at UBS; Price Target: $195.00

Nick Scali (NCK)

• Downgraded to Market-weight from Overweight at Wilsons; Price Target: $19.20 from $17.30

News Corporation (NWS)

• Downgraded to Neutral from Outperform at Macquarie; Price Target: $57.80 from $58.00

• Retained at Buy at UBS; Price Target: $70.00

Pinnacle Investment Management Group (PNI)

• Retained at Accumulate at Morgans; Price Target: $26.30 from $23.80

Perpetual (PPT)

• Retained at Buy at Bell Potter; Price Target: $23.00 from $22.90

REA Group (REA)

• Retained at Buy at Citi; Price Target: $275.00

• Retained at Outperform at CLSA; Price Target: $277.00 from $262.00

• Retained at Underweight at Jarden; Price Target: $219.00 from $216.00

• Downgraded to Neutral from Overweight at JPMorgan; Price Target: $240.00 from $250.00

• Retained at Neutral at Macquarie; Price Target: $255.00 from $260.00

• Retained at Hold at Morgans; Price Target: $257.00 from $250.00

• Retained at Hold at Ord Minnett; Price Target: $260.00

• Retained at Buy at UBS; Price Target: $290.00 from $294.00

SGH (SGH)

• Retained at Hold at Bell Potter; Price Target: $54.00

Super Retail Group (SUL)

• Downgraded to Hold from Accumulate at Morgans; Price Target: $16.15

TPG Telecom (TPG)

• Retained at Outperform at CLSA; Price Target: $5.52 from $5.00

• Retained at Hold at Jefferies; Price Target: $5.50 from $5.70

• Retained at Neutral at UBS; Price Target: $4.80 from $5.40

Treasury Wine Estates (TWE)

• Retained at Neutral at Macquarie; Price Target: $8.00 from $8.40

West African Resources (WAF)

• Retained at Buy at Canaccord Genuity; Price Target: $4.70

Wildcat Resources (WC8)

• Retained at Speculative Buy at Canaccord Genuity; Price Target: $0.50

Scans