LEONARD LUMBER REPORT: The correction finally showed up.

The correction finally showed up.

After weeks of a steady grind higher, July futures gave back $15, working off an overbought condition. Important for the near term—but the bigger story is positioning.

Both sides are heading for the exits.
The long industry is bailing. The short funds are covering.
Positioning has been cleaned up aggressively, and there’s likely more to go.

That’s where it gets interesting for the longer term.

Open interest is shifting in a meaningful way:

– Funds are now net long

– Industry is now net short

That’s not just noise—it tells you something.

The industry has bought enough wood. They no longer need the hedge. That phase is behind us.

At the same time, funds leaning long suggest they’re starting to position for higher ground.

We came into the year looking for this exact transition—and now it’s here.
The economics still point to more upside than downside.

I’m not calling a full fund policy shift yet…
But if that happens, it’s a game-changer.

Now what?

The market remains fragile to the upside—and that’s a supply story, not demand.

The demand looks steady. It’s not the problem.
Supply, on the other hand, continues to ebb and flow with timing and order files. That’s what’s driving the instability.

Because of that setup, the market is highly reactive.
Any outside positive influence—funds stepping in on the buy side, for example—and futures can move higher quickly.

But cut that off, and the tone changes just as fast.
A quiet, non-event summer likely drifts us back toward the lows.

That’s why we’ve been stuck in this flat, grinding range.
We did force the funds out—but it didn’t give us the sharply higher prices we expected.

And that matters.

It tells you the market isn’t weak—it’s just lacking a catalyst. Until something steps in to tip the balance, we’re stuck in a steady, sideways trade with a slight upward bias when flows show up.

Technical:

The RSI in July is 50.30%. The ROC was 2.50 to 1. July closed under the 200-day, and all the momentum indicators have turned down. This remains the B leg down.

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