LEONARD LUMBER REPORT: Futures kept working higher last week

The grind higher continues.
Futures kept working higher last week, but you’re starting to feel the weight of an overbought market. Cash didn’t care—it pushed higher again. The pipeline is still a question mark, but what matters right now is simple:
there’s business getting done every day, and it’s getting done at higher levels.

Mills deserve some credit here. They cleared out excess a few weeks back ahead of this buy wave, and now they’re sitting in a position of control. Files are in good shape, and because of that: A futures pullback doesn’t ripple into cash. Not right now. It’s that tight.

Under the surface, positioning:

– Industry continues to liquidate aggressively—selling size every day without breaking the market

– Funds are buying back shorts—but not nearly at the pace of industry selling

– Result: open interest is falling off hard

That matters.

At this rate, the industry is on track to not be hedged.
That’s not a small shift—it changes how this market behaves.

And here’s the miss:

The market never got the volatility in cash that people expected.
No air pockets, no panic resets—just a steady tightening and grind. Now, keep draining open interest—another ~1,000 contracts—and you likely start to see it: Volatility comes back. Not because of weakness, but because the market loses participation and depth.
Less hedging, thinner structure → faster, sharper moves both ways.

Bottom line:

– Cash is in control and not fragile

– Industry is exiting cleanly without damage

– Open interest collapse is the real story

One more thing worth noting:

As of this writing, the RSI in the CA$ is sitting at ~7%. That’s not just oversold—that’s extreme. About as washed out as it gets, outside of the negative crude episode.

So, what is it?

Is the Canadian economy really that weak? Or is this just a currency trade?

Hard to argue it’s purely macro deterioration at that level. This feels more like:

– Positioning stretched to one side

– USD strength / CAD weakness feeding the move

– Flows dominating fundamentals in the short term

When you get readings this extreme, it’s usually not about “fair value”—it’s about imbalance.

Technical:

Technically, this has largely done the work.

Strip out the 86.70 July RSI and the read turns constructive.
We cleared the 61% retrace at 621.20 and held—momentum confirmed. What next?

Setup:

– 80/20 now → 90/10 next week

– Move is mature, but not dead

Positioning:

– Short risk is fading

– Don’t lift hedges—scale them, take profit

– Re-hedging on the short side is required

Cycle hasn’t changed:

Too much wood to not enough and then too much again

Bottom line:

Distributors got saved.
Don’t give it back.