LEONARD LUMBER REPORT: 2025 has been a year of the announcement

The Lumber Market:

2025 has been a year of the announcement. Each causing rallies. There are no supply issues or a demand push that rallies the market. The rallies are triggered by fear of less wood or higher priced wood. Neither have come into play yet, but the fear is real. That said, we are seeing each rally carrying considerably less weight than the last. My thought is that every time we get some type of verbiage thrown at us the trade steps up. It has been the same way for 3 years now. The buyers are adding to the pile each time with a “what if” attitude. They have less risk at the low cash numbers. The best risk management for the last few years has been to buy a few extra deals.

Last week we saw the attitude of a market by Wednesday entering the abyss only to get an announcement that a mill is laying off 2000 workers. That caused a short covering rally or maybe it is better to categorize it as lack of selling event. Most would agree that the margins are the tightest in almost 8 years. Everyone’s ROI is in the tank. That equates to less hedging and a more proactive exited policy of those hedges. The low trading volume allows the futures to spike up then fall. My guess for next week any support will force more hedgers out. Also, a low volume environment when the funds are rolling shorts could cause a spike. It is too hard to be short in this market. That said, I’ll bet in the long run those who did the basis and kept their discipline will go to the bank again. Fundamentals are fundamentals.

Technical:

There are two moving averages that stand out. The first is the 13-day at 596.35. The other is the 200-day at 617.60. Thursday’s trade left a gap from 598.00 to 600.50. The market has a slight sell program from an algo/fund showing up daily. Low volume does not help their strategy but does keep them in the game. That could create the selling that closes the gap from last week. On the flip side, any strength early in the week will set the 200-day as the bullseye.

There isn’t any data out there to support trend analysis. We are stuck with the technical read. The 200-day moving average is used by billion-dollar stock market companies to measure the Dow. 617.60 is the objective and we will then see if trading above it weakens some knees out there.