LEONARD LUMBER REPORT: WAS THERE A KEY TAKEAWAY LAST WEEK?
Lumber Weekly
Last Week:
Was there a key takeaway last week? No. It was a holiday-shortened week that saw liquidation and rolling. The focus was on moving positions and not price discovery. There was a slight erosion in the cash market as the week ended. I’m unsure if it was a lack of interest or a rebalance. I do know that expecting a sharp sell-off in cash hasn’t been a good strategy. It’s always a grind. Today, there is a forward sales value under $480 in November and a basis value over $530. Those tight parameters could keep futures flat.
Thought:
If there is one word that sums up this market in 2023, it would be “resilient.” If you made a mistake this year, you were not punished. Entering the market too early or too late didn’t end up in the catastrophic spiral it did in the last few years. The market has stayed within its value parameters for the whole year so far. Let’s face it: This market deserved to go much lower. After a run on mortgage rates from 3% to over 7%, it should have broken the market, but it held up. Any sell-off from here will be more mental-driven than physical. We were looking for September to start indicating less supply and less demand all year. If that is the case, expect more of the same trading and opportunities.
Summary:
The 200-day moving average of 548.40 and the 100 day at 535.40 are beacons of light for this market. They are also beacons of hope. Seldom do lumber futures have such prominent technical highlights and do not reach then exceed them. It will again, just not yet. A very strong downward channel comes in at 516.60 in November. This market could ride that trendline lower for the next few weeks. The industry yearend has frozen trade. The typical lows in October may be the case again.
Note: it looks like the funds are getting shorter.
Daily Bulletin:
https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf
The Commitment of Traders:
https://www.cftc.gov/dea/futures/other_lf.htm
About the Leonard Report:
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Brian Leonard
312-761-2636