Evening Wrap: ASX 200 steadies on strong tech, property, financials and gold, energy and mining stocks dip again

The benchmark S&P/ASX 200 index logged a modest rebound from yesterday's bloodletting with strong performances from technology, real estate, financial, and gold stocks.

Lower market yields are driving gains in these sectors, but given those yields are being created by a growing consensus the world is heading for an economic slowdown – they are driving significant declines in growth-oriented sectors like Energy and Resources (two of the worst performing sectors today).

For all the key moves in the key stocks, plus how the brokers responded to them, plus detailed technical analysis on the ASX 200, US bond yields, and gold...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 31.9 points higher at 7,982.4, 0.40% from its session low and just 0.12% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by a narrow 145 to 127.

The Information Technology (XIJ) (+2.3%) was the best performing sector today, possibly in response to lower market yields overnight. In theory, this sector is typically a major beneficiary of lower market yields, as it is considered a long duration sector (this is fund manager jargon for highly sensitive to moves in interest rates).

Check out today’s ChartWatch as to why “tech went up on lower market yields” isn’t the obvious reason for today’s move. I can’t say it didn’t help, though, and clearly NextDC’s (NXT) +8.4% pop also had plenty to do with it. No news there, the company did respond to an ASX price query noting it had nothing to report, but that it was the beneficiary of a rebalance of a US-based real estate benchmark index overnight.

Today's best performing major ASX stocks

The rest of the sector performance read like a lower rates on weaker global growth outlook script. As in spot-on.

Real Estate Investment Trusts (XPJ) (+2.0%) adore lower market yields as they’re basically a big ball of debt funding, and other sectors like Financials (XFJ) (+1.0%) and the Gold (XGD) (+1.0%) sub-index are also typical major beneficiaries.

On the other hand, doing it tough today were growth oriented sectors like Energy (XEJ) (-3.9%) and Resources (XJR) (-0.4%). Spitting those two was Utilities (XUJ) (-1.6%), but there’s a massive overlap between the Aussie Energy and Utilities sectors.

To be fair to Energy and Utilities, though, they were probably always going to be down today considering their respective two major constituents, Woodside Energy (WDS) (-6.8%) and Origin Energy (ORG) (-2.7%) both went ex-dividend today. I suggest Citi’s downgrade of Woodside to SELL from NEUTRAL and price target cut to $24.50 from $25 likely also dragged on its price.

Today's worst performing major ASX stocks

In conclusion, whilst today for the most part wasn’t terrible, it wasn’t exactly an emphatic response to yesterday's crushing sell off. Again, more on that in ChartWatch below!

ChartWatch

US 10-Year T-Note Yield %

The root-cause of the stock market's current problems

I touched upon the US 10-Year T-Note chart in the Markets section of yesterday’s Evening Wrap. You might want to also review this article I wrote several weeks ago about how the bond market is presently influencing the stock market, as well as the ChartWatch in 15 July’s Evening Wrap where I kinda predicted this whole mess in advance.

We have passed the inflection point where the prospect of lower official interest rates is considered good for stocks. The US 10-Year T-Note represents the risk-free rate of return (because Uncle Sam always pays his bills) in the long term. If you think of stocks as risky assets (yes even your bank shares!), then usually when the return on risk free assets falls, it’s good for stocks as they have a lower comparative return to compete with.

That’s the norm. Lower rates equals good for stocks / higher rates equals not so good.

But every now and then (we’re talking about just before every recession that’s happened over the last 30-40 years), falling bond yields becomes bad for stocks. This is because the bond market is likely positioning for significantly weaker economic growth ahead, and that official cash rates must fall to accommodate.

The bond market always leads. It leads everything. Because it represents the price of risk-free money and the price of risk-free money determines the price of all risky assets.

So, if you don’t understand how the bond market works, or what the bond market is telling you, you are flying blind with your stock portfolio.

Anyways, long story short, stock markets have struggled the last two sessions because of some very week economic data on Friday night and backed up again last night with substantially weaker than expected JOLTS numbers (US job openings).

US JOLTS, note the last two dips preceded recessions!

The result is another large black candle in the chart above of the US 10-Year T-Note yield. In short, for stocks to rally, we likely need to see a few white candles in this chart first.

S&P/ASX 200 (XJO)

Back to stuck in the middle, long term uptrend ribbon must hold

(Note how I went bonds first, stocks second here!)

The last time we covered the XJO was in ChartWatch in the Evening Wrap on 26 August.

In that update, we were tracking what was developing as a very nice V-shaped bounce. I said that there wasn’t anything in the technicals at the time to indicate a retest of the 8149 high wasn’t possible.

As always, I covered myself with the usual disclaimer: But! Watch the candles… “Supply will manifest itself in that zone as black-bodied candles and or upward pointing shadows.”

It did. Yesterday. And that changes things quite a bit.

This is due to the size of yesterday's supply-side candle, and today’s lack of demand-side response to it. It also doesn’t help that yesterday's candle closed below the short term uptrend ribbon, and that today, that ribbon has transitioned to neutral.

Which is where I think we are again. Frustratingly stuck back in the middle between the longer term excess demand evidenced by the rising long term uptrend ribbon, and the clearly marked supply zone between 8117-8149. There will be volatility in between these boundaries, and therefore probably some pain.

It would be a good sign if the current supply pulse dissipates quickly, and only a very shallow retracement of 7628-8117 occurs. The shallower the better. The more punctuated by white-bodied candles and or downward pointing shadows the better. These signals will increase the likelihood of a quick resumption of the short term uptrend.

Alternatively, (covering myself again), black-bodied candles and or upward pointing shadows will increase the likelihood of a retest of dynamic demand at the long term uptrend ribbon, now kicking in around 7780.

It is critical that the long term uptrend ribbon holds, for below it, we are talking end of the bull market sort of stuff…

Gold Futures (Front month, back-adjusted) COMEX

Leaning toward staying the course on gold

The last time we covered gold was in ChartWatch in the Evening Wrap on 13 August.

In that update, I noted by gut suggested gold could indeed crack its then-record high at 2536.1.

It did, but not by very much, topping out at 2570.4.

As wild as local ASX gold stocks have been (they were worst performing sector on the entire ASX in a bad day for the whole market yesterday), the gold price looks fine. Sure it’s pulled back very modestly to once again test dynamic demand at the short term uptrend ribbon, but two sessions of downward pointing shadows into that zone suggest there is indeed a reasonable degree of excess demand there.

The congestion (indecision) beneath 2570.4 is not ideal, but there’s nothing just yet to suggest the prevailing short and long term uptrends cannot continue. So, until I see the telltale fingerprints of excess supply, i.e., black-bodied candles and or upward pointing shadows, I am very much leaning to staying the course here.

Key levels? Obviously, supply is at 2570.4 – a close above that should pave the way for an extension of the prevailing uptrend. 2502.7 is demand, and it coincides with the bottom of the short term uptrend ribbon. A close below it would be problematic for gold bulls.

Economy

Today

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

Later this week

Friday

• 00:00 USA ISM Services PMI August (50.9 forecast vs 51.4 in July)

• 22:30 USA Non-Farm Employment Change August (+164,000 forecast vs +114,000 in July) and Unemployment Rate (4.2% forecast vs 4.3% in July)

• 22:30 USA Average Hourly Earnings August (+0.3% forecast vs +0.2% in July)

Latest News

Interesting Movers

Trading higher

• +13.5% Appen (APX) - No news, continues to rebound from short and long term uptrend ribbons 🔎📈

• +8.4% Nextdc (NXT) - No news, but N indicates likely due to being included in the NAREIT Real Estate Index - Quarterly Review 2024.

• +7.7% Omni Bridgeway (OBL) - Change in substantial holding from PPT (increase).

• +5.8% Aussie Broadband (ABB) - Continued positive response to yesterday's N, retained at buy at Ord Minnett and price target increased to $4.18 from $4.16.

• +5.6% Resolute Mining (RSG) - No news, generally strong ASX gold sector today on favourable global markets yield decline, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +5.5% Westgold Resources (WGX) - Mining Commences at South Junction, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +5.3% Ramelius Resources (RMS) - No news, ditto gold, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +5.2% Red 5 (RED) - No news, ditto gold.

• +5.0% Charter Hall Group (CHC) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +4.8% Pantoro (PNR) - No news, ditto gold, rise is consistent with prevailing short and long term uptrends 🔎📈.

• +4.2% Kelsian Group (KLS) - Change in substantial holding (increase from Yarra Capital Management).

Trading lower

• -16.0% Coronado Global Resources (CRN) - FY2024 Guidance Update, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -11.8% Wildcat Resources (WC8) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -11.0% Challenger (CGF) - Challenger and Apollo business relationship

• -8.1% Strike Energy (STX) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -7.6% Anteris Technologies (AVR) - Scheme Booklet Dispatched, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -6.8% Woodside Energy Group (WDS) - Ex-dividend $1.02 fully franked, plus downgraded to SELL from NEUTRAL at Citi and price target cut to $24.50 from $25.00 (see Broker Notes section below), fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -5.9% Mineral Resources (MIN) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -5.3% Karoon Energy (KAR) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -5.1% Imugene (IMU) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -4.3% Champion Iron (CIA) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

• -4.2% Monadelphous Group (MND) - Ex-dividend $0.33 fully franked

• -4.0% Sayona Mining (SYA) - No news, fall is consistent with prevailing short and long term downtrends (it has consistently appeared in ChartWatch Scans Downtrends Lists!) 🔎📈

Broker Notes

• Aussie Broadband (ABB)

  • Retained at buy at Ord Minnett; Price Target: $4.18 from $4.16

• Australian Finance Group (AFG)

  • Retained at neutral at Citi; Price Target: $1.65

• Aristocrat Leisure (ALL)

  • Upgraded to accumulate from hold at Ord Minnett; Price Target: $59.00 from $52.00

• Amotiv (AOV)

  • Retained at outperform at Macquarie; Price Target: $13.64

• Eagers Automotive (APE)

  • Retained at neutral at Macquarie; Price Target: $10.50

• ARB Corporation (ARB)

  • Retained at neutral at Macquarie; Price Target: $43.80

• Autosports Group (ASG)

  • Retained at outperform at Macquarie; Price Target: $2.80

• Collins Foods (CKF)

  • Retained at neutral at Macquarie; Price Target: $8.30

• Coles Group (COL)

  • Retained at outperform at Macquarie; Price Target: $20.20

• Curvebeam AI (CVB)

  • Retained at buy at Bell Potter; Price Target: $0.26 from $0.35

• Domino's Pizza Enterprises (DMP)

  • Retained at neutral at Macquarie; Price Target: $35.00

• Downer EDI (DOW)

  • Retained at neutral at Macquarie; Price Target: $5.77

• Endeavour Group (EDV)

  • Retained at neutral at Macquarie; Price Target: $5.40

• Fleetpartners Group (FPR)

  • Retained at neutral at Macquarie; Price Target: $3.46

• Genesis Minerals (GMD)

  • Retained at neutral at UBS; Price Target: $2.30 from $2.25

• Graincorp (GNC)

  • Retained at outperform at Macquarie; Price Target: $9.65

• GPT Group (GPT)

  • Upgraded to overweight from equal-weight at Morgan Stanley; Price Target: $5.60 from $4.80

• Harvey Norman (HVN)

  • Retained at outperform at Macquarie; Price Target: $5.00

• IGO (IGO)

  • Retained at underweight at Morgan Stanley; Price Target: $4.55

• Inghams Group (ING)

  • Retained at outperform at Macquarie; Price Target: $3.50

• JB HI-FI (JBH)

  • Retained at outperform at Macquarie; Price Target: $77.00

• Liberty Financial Group (LFG)

  • Retained at buy at Citi; Price Target: $4.15

• Latitude Group (LFS)

  • Retained at neutral at Citi; Price Target: $1.15

• Mineral Resources (MIN)

  • Retained at overweight at Morgan Stanley; Price Target: $70.00

• McMillan Shakespeare (MMS)

  • Retained at outperform at Macquarie; Price Target: $20.78

• Monadelphous Group (MND)

  • Retained at outperform at Macquarie; Price Target: $14.50

• Metcash (MTS)

  • Retained at outperform at Macquarie; Price Target: $4.20

• NRW (NWH)

  • Retained at neutral at Macquarie; Price Target: $3.37

• OOH!Media (OML)

  • Retained at neutral at Goldman Sachs; Price Target: $1.50

• Orora (ORA)

  • Retained at neutral at Citi; Price Target: $2.55

  • Retained at positive at E&P; Price Target: $2.70

  • Upgraded to buy from hold at Jefferies; Price Target: $3.00 from $2.40

  • Upgraded to overweight from neutral at JP Morgan; Price Target: $2.85 from $2.40

  • Retained at hold at Morgans; Price Target: $2.60 from $2.50

  • Retained at hold at Ord Minnett; Price Target: $2.60 from $2.30

  • Retained at neutral at UBS; Price Target: $2.45

• Pilbara Minerals (PLS)

  • Retained at underweight at Morgan Stanley; Price Target: $2.70

• Patriot Battery Metals (PMT)

  • Retained at buy at UBS; Price Target: $0.65 from $1.00

• Pepper Money (PPM)

  • Retained at neutral at Citi; Price Target: $1.55

• REA Group (REA)

  • Retained at outperform at Macquarie; Price Target: $229.00 from $228.00

• Resimac Group (RMC)

  • Retained at neutral at Citi; Price Target: $0.90

• Sandfire Resources (SFR)

  • Retained at neutral at Goldman Sachs; Price Target: $8.20 from $8.50

• SG Fleet Group (SGF)

  • Retained at outperform at Macquarie; Price Target: $3.18

• Sigma Healthcare (SIG)

  • Retained at underperform at Macquarie; Price Target: $0.90

• Smartgroup Corporation (SIQ)

  • Retained at outperform at Macquarie; Price Target: $9.60

• Smartpay (SMP)

  • Retained at buy at Shaw and Partners; Price Target: $2.20

• Service Stream (SSM)

  • Retained at neutral at Macquarie; Price Target: $1.41

• Seven Group (SVW)

  • Retained at outperform at Macquarie; Price Target: $43.90

• Treasury Wine Estates (TWE)

  • Retained at outperform at Macquarie; Price Target: $13.90

• Ventia Services Group (VNT)

  • Retained at outperform at Macquarie; Price Target: $4.53

  • Retained at outperform at Macquarie; Price Target: $4.53

• Woodside Energy Group (WDS)

  • Downgraded to sell from neutral at Citi; Price Target: $24.50 from $25.00

• Wesfarmers (WES)

  • Retained at neutral at Macquarie; Price Target: $75.30

• Whitehaven Coal (WHC)

  • Retained at overweight at JP Morgan; Price Target: $9.20

• Worley (WOR)

  • Retained at outperform at Macquarie; Price Target: $17.92

• Woolworths Group (WOW)

  • Retained at neutral at Macquarie; Price Target: $37.00

• Xero (XRO)

  • Downgraded to accumulate from buy at Ord Minnett; Price Target: $160.00 from $150.00

Scans