Evening Wrap: ASX 200 slumps as bond market rout triggers gold and mining wipeout – WDS and CSL only places to hide

The ASX 200 fell as the bond market sell-off drove market yields even higher. The result? A comprehensive sell-off across technology, gold, materials, and consumer discretionary stocks. Energy was the sole meaningful winner as Brent crude surged nearly 5% overnight on fresh US strikes against Iranian oil infrastructure.

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. Also, I have detailed technical analysis on the Nasdaq Composite and the S&P/ASX 200 in today's ChartWatch.

Let’s dive in!

The S&P/ASX 200 (XJO) finished 88.3 points lower at 8,978.4, 1.0% from its session highw and 0.5% from its low. In the broader-based S&P/ASX 300 (XKO) advancers lagged decliners by a disappointing 94 to 193. 😭

Bond market-ageddon! 🦖🌠

Information Technology (XIJ) (-4.1%) was the biggest casualty. When benchmark risk-free yields rise, the rate used to discount future earnings rises with them. For a conventional business earning profits today, the impact is modest. For a high-P/E, high-growth technology business whose earnings are weighted heavily toward future years, the discounting impact is severe — each additional basis point of yield compresses the present value of those distant earnings disproportionately. NextDC (NXT) (-7.9%), Weebit Nano (WBT) (-7.5%), WiseTech Global (WTC) (-6.8%), Siteminder (SDR) (-6.0%), and Life360 (360) (-5.2%) were all savaged.

US 10-Year T-Bond Yield chart

The Gold Sub-Index (XGD) (-2.4%) received the same higher-yield treatment — gold produces no income, requires storage and insurance costs, and therefore competes directly with risk-free government bonds for capital. When benchmark bond yields surge, that competition intensifies and gold loses. COMEX gold futures fell 1.9% overnight before easing a further 0.5% to US$4,376/oz in Asian trade. Kingsgate Consolidated (KCN) (-7.0%), St Barbara (SBM) (-5.8%), Ora Banda Mining (OBM) (-4.9%), Westgold Resources (WGX) (-4.2%), and Newmont (NEM) (-3.8%) were all sharply lower.

Materials (XMJ) (-2.3%) bore the commodity-price and growth-concern combination — higher US yields strengthen the US dollar, which makes dollar-priced commodities more expensive for non-US buyers, compressing demand. COMEX copper futures fell 1.3% overnight before easing a further 0.7% to US$6.554/lb in Asian trade. Lynas Rare Earths (LYC) (-5.1%), IGO (IGO) (-4.3%), Nickel Industries (NIC) (-4.1%), Pilbara Minerals (PLS) (-3.9%), Champion Iron (CIA) (-2.6%), Sandfire Resources (SFR) (-2.5%), and BHP (BHP) (-2.4%) were all lower.

Consumer Discretionary (XDJ) (-2.2%) was the final major casualty — high market rates flow directly into higher mortgage and personal borrowing costs, reducing household disposable income and compressing consumer spending capacity. Lovisa (LOV) (-6.6%), Universal Store (UNI) (-5.4%), Super Retail Group (SUL) (-3.4%), and Wesfarmers (WES) (-2.9%) were all sharply lower.

But it wasn't a complete wipeout. There were some VERY STRONG MOVES TODAY. And apart from energy, they were in the most defensive, non-discretionary segments of the market you can get... (but first, energy!)

Energy (XEJ) (+1.2%) was the session's unambiguous best performer as ICE Brent crude futures surged 4.6% overnight before adding a further 0.4% to US$95/bbl in Asian trade — approaching the psychologically significant US$100 mark as US strikes on Iranian oil infrastructure raised fresh fears about regional supply disruption. Beach Energy (BPT) (+3.5%), Karoon Energy (KAR) (+2.3%), Santos (STO) (+2.1%), and Woodside Energy (WDS) (+2.0%) all advanced as oil and gas producers responded to the crude price signal with conviction.

Health Care (XHJ) (+0.3%) was the session's best defensive performer — a sector that generates revenues irrespective of the rate cycle and is therefore largely insulated from the bond yield shock that hammered everything around it. Telix Pharmaceuticals (TLX) (+2.1%), Ramsay Health Care (RHC) (+2.1%), Cochlear (COH) (+1.9%), Ansell (ANN) (+1.6%), and CSL (CSL) (+1.3%) all advanced.

Utilities (XUJ) (+0.1%) barely held positive ground, the sector's bond-proxy characteristics working both for and against it simultaneously — higher yields reduce the relative appeal of stable utility income, but the surging oil price added an energy-earnings overlay for several major constituents. AGL Energy (AGL) (+2.0%) and APA Group (APA) (+0.9%) both firmed.

Financials (XFJ) (-0.1%) was fractionally negative but outperformed the broader market substantially — and the driver was sector-specific and elegant. Higher benchmark bond yields are toxic for most asset classes, but for insurers they are directly beneficial — insurance companies park premium inflows in short-duration fixed income securities, and when yields rise, those portfolios earn more. Insurance Australia Group (IAG) (+5.7%), NIB Holdings (NHF) (+2.5%), Suncorp (SUN) (+2.3%), and QBE Insurance (QBE) (+2.2%) all surged, providing enough index weight to drag the sector to near-flat against a backdrop where the major banks were lower.

Consumer Staples (XSJ) (-0.6%) told two separate stories within a single sector. Primary producers and agricultural companies had a strong session — non-discretionary food production businesses that pass cost increases through to consumers and benefit from structural supply constraints. GrainCorp (GNC) (+12.5%), Select Harvests (SHV) (+7.1%), Inghams (ING) (+4.4%), Endeavour Group (EDV) (+2.9%), The A2 Milk Company (A2M) (+2.7%), Australian Agricultural Company (AAC) (+1.5%), and Elders (ELD) (+1.5%) all advanced. Yet the consumer facing part of the sector, the supermarkets moved in the opposite direction — Woolworths (WOW) (-1.7%) and Coles (COL) (-0.6%) both fell.

Analysis

Yesterday I wrote:

I expect you've already glanced at the chart above and ascertained in about one second:

• ST Trend: D = S = P➡️ ⚖️

• LT Trend: D > S = P⬆️ ✅

That was in relation to Monday's candle. If we repeat the process today, I doubt that any of us would still go with: "ST Trend: D = S = P➡️ ⚖️"

We have our fifth peak / point of supply below 27191, creating an expanding zone of supply that now sits at 26701-27191 — a seemingly impervious barrier.

The candles are increasingly supply-side in nature, black-bodied and or with upward pointing shadows. Tuesday delivered another close below the short term uptrend ribbon.

There's red flags right across the short term signals. 🚩

Volume suggests little demand side engagement or desire to repel the growing supply (i.e., no FOMO or BTD here!). So we must now conclude:

• ST Trend: D = S = P⬇️ ⚠️

• LT Trend: D > S = P⬆️ ✅

But the long term trend remains up, and as trend followers, we must not forget this. Indeed, given the charts of crude oil and 10-year bond yields shown in the Wrap section above, I 'd say the Comp is actually holding up pretty well all things considered! (Compare it to the Russell 2000 — as discussed in today's webinar, link to the recording on YouTube below 👇).

Good trading is all about balance. Reading the balance between demand and supply, but then responding to it with the correct balance between risk and reward.

Our tool for the last item is how much we choose to risk, and as you know, I'm already 50% cash on the Comp. I think it's the right balance given the present demand and supply signals.

If I see a nasty candle (long black, upward pointing shadow) closing below 25910, I'll likely cut my portfolio risk even further.

View

1/2RP. (RP = Risk Position — it reflects my personal allowable capital allocation limit for my investments in US stocks. So 1/2RP is 50%, 2/3RP is 67% and FRP is 100%).

Key Levels

26863 is the key point of supply vs 25910 and then the long term trend ribbon (presently 24131-25042) is the key point / zone of demand.

Analysis

Full analysis in today's ChartWatch recording... but can I say, since that intra-candle update... a decent whack of downward pointing shadow has appeared! 🤞

Where did the BTD kick in? 🧐

Smack-bang at the 8940 point of demand. So, we can see how 9019 occurred smack-bang in the short term uptrend ribbon — i.e., excess demand exactly where we'd expect excess demand — and once that slipped, demand appeared at the next key point down...

It's nice when things just work!

But it's not nice when a level we pegged just yesterday (9019) as doing a great job of holding back supply — breaks! ⛓️‍💥

Good bounce from the lows today — but alas, the short term trend is unequivocally down now — and therefore it's not enough to avoid me cutting my portfolio RP. If only as a precautionary measure. ⚠️

Measured transition. No need to panic and to rush it...

View

I am cutting to 1/2RP on Australian shares (50% of my capital allocated to ASX shares can be invested, while 50% should be retained as cash).

Key Levels

9221-9297 is the key zone of supply to contend with, while 8940 is the next key point of demand).

(Glossary of acronyms! Old Tin Pot (OTP): S&P/ASX 200 | MOTN: More Often Than Not | FOMO: Fear Of Missing Out | HOFU: Holding On For Upside | BTD: Buy The Dip | NUTE: No Urgency To Enter | FOHO: Fear Of Holding On | STR: Sell The Rally | RP: Risk Position | FFS: Fund Flow Shenanigans!)

***CHARTWATCH LIVE WEBINARS — NEW VIDEO DROPPED!!! 📺🍿***

Is this the end for the stock market? This expert analyst is loading up on cash 💰

TODAY

• AUS June Quarter Gross Domestic Product (GDP)

  • Result: +0.3% q/q vs +0.3% q/q in March

LATER THIS WEEK

THURSDAY

• No major economic data releases scheduled for this day...

FRIDAY

• 00:00 USA August ISM Services PMI (54.1 forecast vs 54.1 in July)

• 22:30 USA August Non-Farm Payroll

  • Non-Farm Employment Change: +58,000 forecast vs -23,000 in July

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

  • Average Hourly Earnings: +0.3% m/m forecast vs +0.1% m/m in July