ASX 200 mission accomplished! New high on inflation beat, growing rate cut hopes

Today in Review

Markets

ASX 200 Session Chart

The S&P/ASX200 (XJO) finished 80.5 points higher at 7,680.7, 1.46% from its session low and just 0.02% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by an impressive 192 to 84. This is important because broad-based moves which close near the high of the session are more likely to be sustainable.

You can either blame today's new record and stonking performance on a better than expected inflation print, or you can simply put it down to a wall of demand meeting a vacuum of supply. As I mentioned in this tweet yesterday, it is often very odd how demand and supply act below a major historical resistance barrier.

That barrier can linger for weeks or even months. It may take several attempts to dislodge the supply there, which has been conditioned into thinking that's all they'll ever get. Similarly, buyers are conditioned to think: "There's no rush, prices aren't going anywhere soon, I've got plenty of time to buy at these levels!"

But, when the barrier is broken, it can be like a dam wall bursting. Those who must buy, that is, fund managers sitting on cash (their investors aren't paying them to sit on their hands, they're paying for them to invest!) and index funds who must buy the index no matter what, realise there's a much lower probability of getting set at lower prices. There's no point waiting any longer, and so they begrudgingly start to allocate that cash!

This demand swashes alongside the demand from those who are actively allocating cash (that's how we broke the old record in the first place), along with speculative market timers (like me) who've been patiently waiting for the breakout. There's only one problem. If everyone's trying to buy, then it's very likely few are trying to sell.

All of this demand is working into a supply vacuum, and based upon the oldest rule of economics, D > S = ⬆️P. Kinda like today!

Sector ChartWatch

The best sectors today? Well all of the 11 major ASX 200 sector indices were up, another strong showing of market breadth, and anytime you close at a record high (I haven't been able to say that for about 615 trading sessions) you're probably going to find a few decent sector charts. Here are the charts I felt are worth a special mention based upon their techincals.

S&P/ASX 200 Consumer Discretionary Sector (XDJ)

I can see strong well-established and strong short and long term uptrends, as well as excellent price action (buy the dip) and predominantly demand-side candles (accumulation).

S&P/ASX 200 Financials Sector (XFJ)

Ditto on the Discretionary sector, and this sector is primarily responsible for for stacking on the index points we required to break to a new high. The only drawback in this chart, and it is minor, is the price is starting to get quite a distance from my short term uptrend ribbon. This isn't an issue while the candles remain white / downward pointing shadows, but the further from the short term trend ribbon, the greater the possibility of mean reversion.

S&P/ASX 200 Health Care Sector (XHJ)

Another "heavyweight" sector. I don't feel it looks as extended as the Financials, and it's showing trends, price action, and candles as good as any other sector index in terms of demonstrating a market in a state of excess demand.

S&P/ASX 200 Real Estate Investment Trusts (XPJ)

The Property sector chart above looks as good as any other from a technical standpoint, but zoom out to the weekly chart (not shown) and you'll see it's still clawing its way back after heavy losses in the wake of the COVID-19 pandemic.

I am impressed by the steady build up since the October lows (when long term bond yields finally broke lower), and this sector is a typical beneficiary of rate cuts.

Economy

• AU Consumer Price Index December Quarter, actual +0.6% & 4.1% p.a. vs consensus +0.8% & 4.3% p.a. vs September +1.2% & 5.4% p.a.

  • Down from the 7.8% of the December 2022 quarter, but still well above the RBA's average target range of 2-3%

  • The important food and energy categories showed meaningfully slower price increases, whilst insurance costs shot higher

  • Markets now pricing two 0.25% rate cuts by the end of the year, the first in August (from September previously), but for the RBA to remain on hold at next week's meeting

• China Manufacturing PMI for January, actual 49.2 vs consensus 49.3 vs December 49.0 & Non-manufacturing PMI, actual 50.7 vs consensus 50.6 vs December 50.4

  • Largely in-line with expectations, readings below 50 indicate contraction in a particular sector, so whilst manufacturing improved slightly, it continues to contract

What to watch out for...

Later this week:

• Wed:

  • 02:00 US Conference Board Consumer Confidence for January, consensus 113.9 vs December 110.7;

  • 02:00 JOLTS Job openings for December, consensus 8.73 million vs November 8.79 million

• Thu: 06:00 US FOMC Cash Rate, statement, press conference, consensus no change 5.25%-5.50%

• Fri: 02:00 ISM Manufacturing PMI for January, consensus 47.0 vs December 47.4

• Sat: 00:30 US Non-farm payrolls, average hourly earnings, and unemployment rate for January, consensus +177,000, +0.3%, 3.8% vs December +216,000, +0.4%, 3.7%

Latest News

Sandfire, 29 Metals, Aeris Resources, brokers say only one is their “go to” name in ASX Copper

Ken Griffin: The Federal Reserve can start to cut rates by June

Dividend yield scan: The highest yielding ASX stocks – Week 5

The RBA's fight against inflation enters the last (and hardest) mile

Macquarie's 4 preferred ASX small and mid caps ahead of reporting season

IGO shelves its Cosmos nickel project – but why is the stock clawing back losses?

Interesting Movers

Trading higher

• +17.0% Select Harvests (SHV) - Strong 2024 Crop Volumes and Strengthening Market Pricing

• +9.7% Nickel Industries (NIC) - Ongoing positive reaction to yesterday's New Capital Management Framework including Share Buyback

• +6.3% Chrysos Corporation (C79) - No news since sharp selloff following 24 Jan Chrysos Quarterly Presentation Q2 FY24, trying to bounce off long term uptrend ribbon

• +5.7% The Star Entertainment Group (SGR) - No news since 25-Jan The Star Appoints Sydney CEO

• +5.3% Tabcorp Holdings (TAH) - No news 🤔

• +4.8% Champion Iron (CIA) - Third Quarter FY2024 Results Presentation; retained at BUY at Jarden with price target $8.54, rise is consistent with prevailing short and long term uptrends"

• +4.5% Sigma Healthcare (SIG) - Becoming a substantial holder notice from PPT, rise is consistent with prevailing short and long term uptrends

• +4.1% Homeco Daily Needs REIT (HDN) - No news, bouncing off long term uptrend ribbon, trying to transition from long term downtrend to uptrend

• +4.0% Catapult Group International (CAT) - No news, rise is consistent with prevailing short and long term uptrends

• +3.9% Beacon Lighting Group (BLX) - No news, rise is consistent with prevailing short and long term uptrends

• +3.9% Deep Yellow (DYL) - No news, generally stronger ASX uranium sector today, rise is consistent with prevailing short and long term uptrends

• +3.8% Dexus Convenience Retail Reit (DXC) - Update - Notification of buy-back - DXC, bouncing off long term uptrend ribbon, trying to transition from long term downtrend to uptrend

• +3.7% Virgin Money UK LSE (VUK) - No news, closed back above long term uptrend ribbon, trying to re-establish long term uptrend

• +3.7% HMC Capital (HMC) - No news, rise is consistent with prevailing short and long term uptrends

• +3.6% Paladin Energy (PDN) - No news, generally stronger ASX uranium sector today, rise is consistent with prevailing short and long term uptrends

Trading lower

• -9.8% Weebit Nano (WBT) - Weebit Nano Q2 FY24 Activities Report and Appendix 4C, fall is consistent with prevailing short and long term downtrends

• -9.4% Piedmont Lithium Inc (PLL) - Bad news from partner Sayona Mining (SYA) Quarterly Activities/Appendix 5B Cash Flow Report, fall is consistent with prevailing short and long term downtrends

• -6.4% Calix (CXL) - No news since 29-Jan Leilac-2 to relocate as HM end clinker production at Hanover, fall is consistent with prevailing short and long term downtrends

• -4.7% Perenti (PRN) - Perenti supports IGO through the Cosmos transition, fall is consistent with prevailing short and long term downtrends

• -4.5% Red 5 (RED) - December 2023 Quarterly Activities Report

• -4.5% Audinate Group (AD8) - Downgraded to NEUTRAL from OUTPERFORM at Macquarie, price target increased to $15.80 from $13.50

• -4.2% Domino's Pizza Enterprises (DMP) - Continues to struggle in the wake of profit downgrade: Trading Update, fall is consistent with prevailing short and long term downtrends

• -4.2% OM Holdings 10c (OMH) - Investor Presentation, fall is consistent with prevailing short and long term downtrends

• -4.0% Arcadium Lithium (LTM) - No news, fall is consistent with prevailing short and long term downtrends

• -3.8% Siteminder (SDR) - Possible ongoing negative reaction to yesterday's Trading Update, but also Change in substantial holding from CBA

Broker Notes

• 29METALS (29M)

  • Retained at neutral at Citi; Price Target: $0.50 from $0.73

  • Retained at overweight at Morgan Stanley; Price Target: $0.70

  • Retained at outperform at Macquarie; Price Target: $0.70 from $0.80

• Pentanet (5GG)

  • Retained at buy at Bell Potter; Price Target: $0.08 from $0.11

  • Retained at buy at Shaw and Partners; Price Target: $0.20

• Audinate Group (AD8) downgraded to neutral from outperform at Macquarie; Price Target: $15.80 from $13.50

• AIC Mines (A1M) retained at buy at Shaw and Partners; Price Target: $0.80

• Aeris Resources (AIS) retained at neutral at Macquarie; Price Target: $0.13 from $0.14

• Atlas Arteria (ALX)

  • Retained at equalweight at Morgan Stanley; Price Target: $6.18

  • Retained at neutral at Macquarie; Price Target: $5.80

• Amcor (AMC) retained at neutral at UBS; Price Target: $15.40

• Ansell (ANN) retained at neutral at Macquarie; Price Target: $24.35 from $24.95

• ANZ Group (ANZ) retained at neutral at Jarden; Price Target: $26.30

• Eagers Automotive (APE) retained at hold at Bell Potter; Price Target: $15.65 from $15.50

• Arafura Rare Earths (ARU) retained at buy at Bell Potter; Price Target: $0.19 from $0.44

• Aroa Biosurgery (ARX)

  • Downgraded to overweight from buy at Jarden; Price Target: $1.00 from $1.20

  • Retained at buy at Bell Potter; Price Target: $0.90 from $1.15

• Bendigo and Adelaide Bank (BEN) retained at neutral at Jarden; Price Target: $9.50

• Bellevue Gold (BGL) retained at neutral at UBS; Price Target: $1.45

• BHP Group (BHP) retained at neutral at Citi; Price Target: $49.00

• Bank of Queensland (BOQ) retained at neutral at Jarden; Price Target: $5.60

• Breville Group (BRG) retained at overweight at Morgan Stanley; Price Target: $29.00

• Chrysos Corporation (C79) retained at buy at Shaw and Partners; Price Target: $7.70 from $7.80

• Commonwealth Bank of Australia (CBA) retained at underperform at Jarden; Price Target: $100.00

• City Chic Collective (CCX)

  • Retained at buy at Citi; Price Target: $0.62

  • Retained at equalweight at Morgan Stanley; Price Target: $0.40

• Champion Iron (CIA) retained at buy at Jarden; Price Target: $8.54

• Capricorn Metals (CMM)

  • Retained at neutral at Goldman Sachs; Price Target: $4.60 from $4.55

  • Retained at overweight at Jarden; Price Target: $4.78 from $4.89

  • Retained at neutral at Macquarie; Price Target: $4.80

• Cochlear (COH) retained at underperform at Macquarie; Price Target: $215.00 from $212.00

• Coles Group (COL) retained at equalweight at Morgan Stanley; Price Target: $16.50

• CSL (CSL) retained at outperform at Macquarie; Price Target: $322.50 from $321.00

• Domino's Pizza Enterprises (DMP) retained at overweight at Morgan Stanley; Price Target: $68.00

• Emeco Holdings (EHL) retained at buy at Jarden; Price Target: $1.10

• Emerald Resources (EMR) downgraded to underweight from overweight at Barrenjoey; Price Target: $2.90

• Electro Optic Systems Holdings (EOS) retained at buy at Bell Potter; Price Target: $1.60 from $1.50

• Fineos Corporation Holdings (FCL) retained at outperform at Macquarie; Price Target: $2.47

• Firefly Metals (FFM) retained at buy at Shaw and Partners; Price Target: $1.20

• Goodman Group (GMG) retained at buy at Citi; Price Target: $25.50

• Gold Road Resources (GOR) upgraded to buy from hold at Euroz Hartleys; Price Target: $1.80 from $1.95

• Healius (HLS) retained at neutral at Macquarie; Price Target: $1.50 from $1.95

• Integral Diagnostics (IDX) retained at outperform at Macquarie; Price Target: $2.45 from $2.55

• IDP Education (IEL) retained at overweight at Morgan Stanley; Price Target: $27.50

• Imdex (IMD) retained at overweight at Jarden; Price Target: $2.00 from $2.05

• JB HI-FI (JBH) retained at underweight at Morgan Stanley; Price Target: $43.90

• James Hardie Industries (JHX) retained at overweight at Morgan Stanley; Price Target: $65.00 from $55.00

• Jumbo Interactive (JIN) retained at overweight at Morgan Stanley; Price Target: $19.20

• Jervois Global (JRV) retained at neutral at Macquarie; Price Target: $0.03

• Keypath Education International Inc. (KED) upgraded to outperform from neutral at Macquarie; Price Target: $0.46 from $0.45

• Mader Group (MAD) upgraded at buy at Bell Potter; Price Target: $7.30 from $7.05

• Macmahon Holdings (MAH) retained at buy at Jarden; Price Target: $0.24

• Meteoric Resources (MEI) retained at outperform at Macquarie; Price Target: $0.46

• Metro Mining (MMI) retained at buy at Shaw and Partners; Price Target: $0.06

• Monadelphous Group (MND) retained at overweight at Jarden; Price Target: $14.45

• Megaport (MP1)

  • Downgraded to neutral from overweight at Barrenjoey; Price Target: $12.50 from $11.50

  • Retained at neutral at Goldman Sachs; Price Target: $5.15

  • Retained at buy at UBS; Price Target: $14.50 from $13.30

  • Retained at buy at Citi; Price Target: $12.05

  • Retained at equalweight at Morgan Stanley; Price Target: $10.20

  • Retained at outperform at Macquarie; Price Target: $15.50 from $14.10

• National Australia Bank (NAB) retained at overweight at Jarden; Price Target: $31.50

• Nickel Industries (NIC)

  • Upgraded to buy from hold at Jefferies; Price Target: $0.90 from $0.80

  • Retained at buy at Citi; Price Target: $0.80

  • Retained at outperform at Macquarie; Price Target: $1.10 from $1.00

• NRW Holdings (NWH) retained at overweight at Jarden; Price Target: $2.90 from $2.85

• Orora (ORA) retained at neutral at UBS; Price Target: $2.84

• Pointsbet Holdings (PBH) retained at buy at Jarden; Price Target: $0.94

• Premier Investments (PMV) retained at overweight at Morgan Stanley; Price Target: $32.00

• Regis Healthcare (REG)

  • Retained at outperform at Macquarie; Price Target: $3.55 from $3.05

  • Retained at outperform at Macquarie; Price Target: $3.55 from $3.05

• Ramsay Health Care (RHC) retained at neutral at Macquarie; Price Target: $52.00 from $53.50

• Rio Tinto (RIO) retained at buy at Citi; Price Target: $139.00

• Ramelius Resources (RMS)

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

  • Retained at neutral at Macquarie; Price Target: $1.70

• SiteMinder (SDR)

  • Downgraded to market-weight from overweight at Wilsons; Price Target: $5.34

  • Retained at buy at UBS; Price Target: $6.55 from $6.70

  • Retained at overweight at Morgan Stanley; Price Target: $5.45

• Sandfire Resources (SFR)

  • Retained at neutral at Goldman Sachs; Price Target: $7.20 from $6.70

  • Retained at overweight at Jarden; Price Target: $6.50 from $6.40

  • Retained at buy at UBS; Price Target: $7.60

  • Retained at neutral at Citi; Price Target: $6.90

  • Retained at equalweight at Morgan Stanley; Price Target: $6.30 from $6.00

  • Retained at outperform at Macquarie; Price Target: $7.90

• Sonic Healthcare (SHL) retained at neutral at Macquarie; Price Target: $29.80 from $31.15

• Silver Lake Resources (SLR) retained at outperform at Macquarie; Price Target: $1.50

• Task Group Holdings (TSK) retained at buy at Bell Potter; Price Target: $0.59 from $0.54

• Treasury Wine Estates (TWE) retained at overweight at Morgan Stanley; Price Target: $13.75

• Westpac Banking Corporation (WBC) upgraded to overweight from neutral at Jarden; Price Target: $23.00

• Wesfarmers (WES) retained at equalweight at Morgan Stanley; Price Target: $48.70

• Woolworths Group (WOW) retained at underweight at Morgan Stanley; Price Target: $34.00

Scans

This article first appeared on Market Index on 31 January 2024.