Evening Wrap: ASX 200 slumps on ailing resources as Chinese stock moves point to country's ongoing property woes

The S&P/ASX 200 closed 59.1 points lower, down 0.76%.

It was another disappointing retracement from what is looking like "The Zone of Impervious Resistance"!

That pesky 7911 is proving a tough nut to crack!

Particularly when local Resources stocks continue to be undermined by weak commodities prices and a worrying deterioration in the Chinese property market.

We've got all the details on each of these items, plus details of all of the biggest winners and sinners from today's trade on the ASX, so...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 59.1 points lower at 7,763.2, 0.76% from its session high and just 0.05% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by a dismal 107 to 165.

Only 2 of the 11 major indices closed in the black today: Consumer Discretionary (XDJ) (+0.33%) and Information Technology (XIJ) (+0.29%). The Gold (XGD) (+0.96%) sub-index joined them and was the best performer of the lot.

A combination of stronger US technology stocks on Friday and the growing prospect of lower US rates likely helped Tech and Gold (the latter driving a tidy gain in the gold price). Discretionary’s move was a little more mysterious, perhaps it's still basking in the warm afterglow of last week’s better than expected retail sales data.

Stocks from the best performing sectors today, XDJ, XIJ, and XGD

Doing it tough today was the Resources (XJR) (-1.74%), hit by a double whammy of a reversal in the iron ore price rally (check that 114 point of supply we discussed in Wednesday’s ChartWatch) and dissolving Chinese property stocks (see tonight’s ChartWatch below).

Whilst acknowledging that the behemoth iron ore stocks did most of the damage in terms of index points today, it’s worth pointing out lithium and batter materials stocks were the worst in terms of percentage losses (again!).

ASX Resources stocks today

Energy (XEJ) (-1.45%) also struggled today. Brent and WTI crude prices might be staging their own reversals from key points of supply (I’ll do Brent in tomorrow’s ChartWatch), plus Santos (ASX: STO) (-2.13%), gave up some of its takeover rumour gains.

Still, it wasn't all doom and gloom here – as I note the continuing outperformance of ASX coal stocks.

ASX Energy stocks today

ChartWatch

SSE Composite (SSEC) (China)

Still making downtrends great again

The last time we covered the SSEC was in ChartWatch in the Evening Wrap on 20 June.

In that update, we noted it was returning to its long term down-trending ways.

That slow motion unravelling continues, and this chart simply cannot be good news for our resources sector, particularly when you consider the next chart…

The Chinese property market remains the weakest link of the Chinese economy

The Chinese property market remains the weakest link of the Chinese economy and threatens to drag it into a Japan-90’s style recession.

There are no redeeming features in term of demand-side control in either of the above charts. There’s just so little resistance to the steady supply-side onslaught: short and long term downtrends (representing sell the rally), falling peaks and falling troughs (representing supply reinforcement and demand removal), and predominantly supply-side candles (large, pervasive programmed sell orders).

Which brings us to our next chart…

The ASX Resources sector needs to print higher troughs and demand-side candles quickly

The local resources sector got a reprieve from the May-June sell off last week, rallying hard through to Thursday’s peak. That rally was not enough to breach the long term downtrend ribbon, and today’s candle has closed the index back below the short term downtrend ribbon.

A lower peak from here, along with further supply-side candles like today’s could precipitate another test of the 5506 low. Beyond that, it could get ugly.

Alternatively, and let’s hope so, we can make a higher trough, and subsequently higher peak to close above the long term downtrend ribbon. White-bodied candles and or downward pointing shadows would be crucial to this scenario – so keep an eye out for them!

Economy

Today

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

Later this week

Tuesday

• 10:30 Westpac Consumer Sentiment July (+1.7% in June)

• 11:30 NAB Business Confidence June (-3 in May)

Wednesday

• 00:00 USA Federal Reserve Chairman Jerome Powell delivers Semi-Annual Monetary Policy Report to Senate Banking Committee

• 11:30 CHN Consumer Price Index (CPI) and Producer Price Index (PPI) June inflation data

  • CPI: +0.4% p.a. forecast vs +0.3% p.a. in May

  • PPI: -0.8% p.a. forecast vs -1.4% p.a. in May

Thursday

• 00:00 USA Federal Reserve Chairman Jerome Powell testimony Day 2

• 10:30 USA Core CPI June (forecast +0.2% m/m and +3.5% p.a. vs +0.2% m/m and +3.5% in May)

Friday

• 10:30 USA Core PPI June (forecast +0.1% m/m and +2.0% p.a. vs +0.0% m/m and +1.8% in May)

Saturday

• 00:00 USA Preliminary University of Michigan Consumer Sentiment July (67.0 forecast vs 68.2 in June)

Latest News

Interesting Movers

Trading higher

• Core Lithium (CXO) +9.9% - Production and Financial Position Update

• Zip Co. (ZIP) +5.8% - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• Weebit Nano (WBT) +5.7% - No news 🤔

• Red 5 (RED) +5.3% - Restructured Finance Facility and June Quarter Results, bounced off long term uptrend ribbon 🔎📈

• Resolute Mining (RSG) +5.0% - No news, generally stronger ASX gold sector today on rising gold price, rise is consistent with prevailing short and long term uptrends 🔎📈

• Tuas (TUA) +4.7% - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• Emerald Resources (EMR) +4.1% - Record Full Year Production of 114koz Achieved at Okvau, generally stronger ASX gold sector today on rising gold price, rise is consistent with prevailing short and long term uptrends 🔎📈

• Coronado Global Resources (CRN) +4.1% - No news, generally stronger ASX coal sector today, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• Gentrack Group (GTK) +3.6% - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• Dicker Data (DDR) +3.6% - No news 🤔

• Droneshield (DRO) +3.1% - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• Clarity Pharmaceuticals (CU6) +2.8% - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• Pro Medicus (PME) +2.6% - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

Trading lower

• Meteoric Resources (MEI) -13.9% - Caldeira's Scoping Study Confirms Exceptional Financials, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• Clinuvel Pharmaceuticals (CUV) -10.8% - No news, reversed Friday's gain 🤔

• Latin Resources (LRS) -8.6% - No news, generally weaker ASX lithium sector today, prices remain depressed, fall is consistent with prevailing short and long term downtrends 🔎📉

• Vulcan Energy Resources (VUL) -7.2% - No news, generally weaker ASX lithium sector today, prices remain depressed, fall is consistent with prevailing short and long term downtrends 🔎📉

• Botanix Pharmaceuticals (BOT) -5.9% - No news 🤔

• 29METALS (29M) -4.5% - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• Syrah Resources (SYR) -4.5% - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• Arcadium Lithium (LTM) -4.5% - No news, generally weaker ASX lithium sector today, prices remain depressed, fall is consistent with prevailing short and long term downtrends 🔎📉

• WA1 Resources (WA1) -4.0% - No news 🤔

• IGO (IGO) -3.9% - No news, generally weaker ASX lithium sector today, prices remain depressed, fall is consistent with prevailing short and long term downtrends 🔎📉

• Cettire (CTT) -3.8% - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• Bluescope Steel (BSL) -3.6% - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• Karoon Energy (KAR) -3.5% - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

Broker Notes

Abacus Group (ABG)

• Retained at buy at Shaw and Partners; Price Target: $1.20

Austin Engineering (ANG)

• Retained at buy at Shaw and Partners; Price Target: $0.75 from $0.60

Ansell (ANN)

• Retained at outperform at Macquarie; Price Target: $28.15

ANZ Group (ANZ)

• Retained at sell at Citi; Price Target: $24.50

• Retained at underperform at Macquarie; Price Target: $26.50

Abacus Storage King (ASK)

• Retained at buy at Shaw and Partners; Price Target: $1.35 from $1.30

Bendigo and Adelaide Bank (BEN)

• Retained at underperform at Macquarie; Price Target: $9.25

Boss Energy (BOE)

• Retained at buy at Bell Potter; Price Target: $5.90 from $6.35

Bank of Queensland (BOQ)

• Retained at underperform at Macquarie; Price Target: $4.75

Car Group (CAR)

• Retained at neutral at Macquarie; Price Target: $32.70

Commonwealth Bank of Australia (CBA)

• Retained at sell at Citi; Price Target: $85.00

• Retained at underperform at Macquarie; Price Target: $95.00

Capricorn Metals (CMM)

• Retained at neutral at Macquarie; Price Target: $5.10

Insurance Australia Group (IAG)

• Retained at outperform at Macquarie; Price Target: $8.00 from $6.40

Judo Capital (JDO)

• Retained at underperform at Macquarie; Price Target: $1.00

Johns Lyng Group (JLG)

• Retained at buy at Citi; Price Target: $7.85 from $7.50

Lendlease Group (LLC)

• Retained at neutral at Macquarie; Price Target: $8.03

Mirvac Group (MGR)

• Retained at outperform at Macquarie; Price Target: $2.26

National Australia Bank (NAB)

• Retained at sell at Citi; Price Target: $26.50

• Retained at underperform at Macquarie; Price Target: $32.50

Paladin Energy (PDN)

• Retained at buy at Bell Potter; Price Target: $15.70 from $16.10

Percheron Therapeutics (PER)

• Initiated at buy at Bell Potter; Price Target: $0.14

REA Group (REA)

• Upgraded to outperform from neutral at Macquarie; Price Target: $212.00 from $196.00

Siteminder (SDR)

• Retained at buy at Citi; Price Target: $6.15 from $6.30

Stockland (SGP)

• Retained at neutral at Macquarie; Price Target: $3.98

Strike Energy (STX)

• Retained at buy at Bell Potter; Price Target: $0.31

Suncorp Group (SUN)

• Retained at neutral at Citi; Price Target: $17.50 from $16.60

• Retained at overweight at Jarden; Price Target: $17.15 from $17.00

• Retained at buy at Jefferies; Price Target: $18.93 from $18.25

• Retained at overweight at JP Morgan; Price Target: $17.00 from $16.50

• Downgraded to neutral from outperform at Macquarie; Price Target: $15.80 from $17.00

• Retained at overweight at Morgan Stanley; Price Target: $20.20

• Retained at hold at Ord Minnett; Price Target: $18.20

Southern Cross Electrical Engineering (SXE)

• Retained at buy at Shaw and Partners; Price Target: $2.00 from $1.80

West African Resources (WAF)

• Retained at outperform at Macquarie; Price Target: $2.00 from $1.90

Westpac Banking Corporation (WBC)

• Retained at sell at Citi; Price Target: $24.75

• Retained at underperform at Macquarie; Price Target: $26.00

Scans