Leonard Lumber Report: Now What?

Now What?

It was a very quiet pre-holiday week, with most of the attention focused on getting out rather than getting in. Who was doing the exiting remains unclear because the COT data is delayed by the Beeks transition. We should get a clearer picture tomorrow.

Price action was uneventful. Most sessions traded sideways on light volume, with Thursday’s modest rally providing the week’s only real spark.

The 620 area continues to act as solid support in both contracts, and the fundamentals appear to support that floor. Ironically, the caution in the market is helping keep takeaway better than expected. We’ve talked all year about the chronically underbought cash market, much of it by design, and that remains true today. If you’re slow, it’s largely because you’ve chosen to stay out of the market.

What we’re seeing now is a trade that wants to get long again—but only at its price. The combination of healthy takeaway and buyer reluctance is giving mills some much-needed confidence to defend levels. If buyers are willing to step up and pay more, it will get done. Until then, expect the standoff to continue.

The longer-term chart continues to support the story. March futures have maintained a strong support line off the April lows, and the technical picture generally confirms the fundamental outlook. It all comes back to the ABC pattern. If that interpretation is correct, the market should gradually work higher from here.

At the same time, let’s not get too far ahead of ourselves. Lumber remains a commodity that can be produced. You may not be able to find studs, but there are plenty of deals on 9-footers. The market has struggled on this one to get every product tight at the same time, and futures are only as strong as the weakest item in the cash market.

That said, today’s market knows there are buyers sweating bullets.

Technical

The technical outlook calls for more of the same, with the possibility of a push back toward the recent highs. With much of the industry sitting flat, the path of least resistance appears to be continued sideways trade with a modest upward bias.

Bottom Line: Buyers remain cautious, mills are gaining confidence, cash is staying firm, and the charts continue to lean constructive. Until something changes materially, expect more of the same—with an edge toward higher prices rather than lower ones. This is not a “punt.” This market does not have a defined trend again. 

Daily Bulletin: