Was Last Week's Pullback Really a Stock Market Crash?

With the All Ordinaries Index recently dropping over five per cent in just a few days, panic set in, with many declaring, "The stock market is crashing." While numerous stocks took a hit, it's crucial to remember that a falling market doesn't mean all stocks decline. In fact, several stocks posted gains during this period. So, which stocks defied the trend and do they present a buying opportunity right now?

What caused the All Ordinaries Index to fall last week?

Before we delve into that, let's discuss the recent decline. The direction of the market is heavily influenced by the top 20 stocks, which together make up over half of the total index in terms of market capitalisation. The simultaneous sell-off of most of the top 20 stocks has been the main driver behind the index's drop.

However, not all stocks fell. Two stocks in the top 20 bucked the trend, indicating that buyers were unwilling to let them go during this recent market turmoil. This strength amidst panic shows not only stability but could signal a potential buying opportunity, so let's take a look.

Rio Tinto (ASX: RIO)

RIO ended up 2 per cent last Monday. This resilience was supported by a positive half-year report on 31 July, showing that buyers were willing to pay a premium for RIO shares even during a broad market sell-off.

Northern Star Resources (ASX: NST)

NST posted a 1.72 per cent gain by the end of Monday. The stock has shown strong support around $14, and if it can rise above $14.70, all signs point to further gains in the medium term.

Given the current economic environment, with interest rates precariously balanced and global instability on the rise, extended volatility is likely. Therefore, holding resilient stocks like these in your portfolio can significantly enhance performance in the current market conditions.

What were the best and worst-performing sectors last week?

The best-performing sectors included Utilities, up 0.04 per cent, followed by Healthcare, down 0.01 per cent and Consumer Staples, slightly down 0.90 per cent. The worst-performing sectors included Energy, down 4.92 per cent, followed by Information Technology, down 3.64 per cent and Financials, down 2.57 per cent.

The best performing stocks in the ASX top 100 included AMP Ltd, up 8.86 per cent, followed by Pilbara Minerals, up 7.34 per cent, and Domino’s Pizza, up 4.53 per cent. The worst-performing stocks included Pro Medicus, down 9.21 per cent, followed by NextDC Limited, down 7.51 per cent, and QBE Insurance, down 7.49 per cent.

What's next for the Australian stock market?

What a difference a week can make! Just two weeks ago, the market reached a new all-time high, despite a late-week sell-off. However, last week the All Ordinaries Index tumbled by over five per cent, sparking widespread concern.

This decline pushed the market back to the critical 7,900-point level, a support zone that has held firm since February. This year, the market has tested this level five times, and on each occasion, buyers have stepped in, driving the market to new all-time highs shortly after.

Unsurprisingly, buying activity re-emerged last Friday, closing the All Ords back above 7,900 points. This resilience is a strong indicator of further upside potential, with a likely run-up to 8,300 on the horizon as buyers continue to defend this crucial level.

Additionally, the materials sector showed strength last week, with some of its largest stocks posting positive returns even amidst the broader market downturn. As I noted in my previous report, the materials sector appears to have found significant support, reinforcing the outlook for further market gains.

Meanwhile, the financial sector experienced a sharp decline, but given its strong performance throughout the year, this pullback was overdue.

So, if last week's sell-off was merely a normal pullback as the market gathers momentum, we can expect a strong rebound and more buying opportunities in the coming weeks.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.