Lumber Archives - Page 11 of 13

11 Feb 2022

Agriculture, Lumber, Market Commentary, Market Updates, new rcmagserv 0 comment

The Leonard Lumber Report: Better Trading In Futures This Week

There was better trading in futures this week, but March opened the limit and locked. The back months had good volume, and July and Sept never hit the limit. At this point, you can exit your March shorts one way or another. That brings us to the next question: What does “life after limit” look like? If you take out the limit downs and the limit ups, we are sitting in the same area with the same dynamics. There is still good demand. Shipping out of the west is a mess, and trucking throughout North America is getting worse. And finally, we just moved closer to the Q2 buy.

The sell-off was a good indicator of a flow of wood through the system, and the rally right back indicates a continued fear that the flow will slow again. I think the industry is doing an excellent job keeping supplies flowing in. Since December, they have been buying “time” and fearing an upset chain. So today, it isn’t tomorrow’s ship time but rather next month’s ship time, and no one has that answer.

Any more bad news from the supply side will set the market off again, while any slowing in demand will force another sell-off. Buckle up….

Let’s Get Technical:

Elliot Wave is not voodoo economics, but that was funny. The biggest takeaway is that markets trade in waves, and in percentage terms, the lumber futures waves are easing in the distance. The corrective wave ran into support and a 20% RSI at a higher level this time down, keeping the cycle positive. We are looking for the top end where the market hits real resistance. Historically, the 1st quarter has strong support and weaker resistance areas, which is seasonal and consistent.

Weekly Round-Up:

$1,200 is not a happy medium, and the risk in both directions is substantial. We have never been in a place that could potentially have a $400 push up or $400 down. Time will ease the upside pressure, and the downside will be around for a while. Position accordingly.

Open Interest and Commitment of Traders:
https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

About The Leonard Report
The Leonard Lumber Report is a new 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.

Before You Go…
A special guest joins us for this episode of The Hedged Edge, who is well known for his many titles, which include Doctor, Editor-in-Chief, Dean, and Chief Academic Officer, just to name a few. Dr. Channa S. Prakash, Dean of the College of Arts and Sciences (CAS) at Tuskegee University, has served as faculty since 1989 and is a professor of crop genetics, biotechnology, and genomics. He is also well recognized for mentoring underrepresented minority students.

Tune in as biotech guru Dr. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between. And as a bonus, we find out what sport he would be interested in playing if he went professional.

31 Jan 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: Looking for Tempered and Defined Market

We entered 2022 looking for a more tempered and defined market but instead have seen some of the most violent swings in lumber history. The market ran up $230 in 8 sessions and then fell $375 in 8 sessions. That is in an industry that thinks making $10 on a car is good. This $11 tick market has always been clearly defined, with extremes in the $20 range. What has changed? The economics of the industry. The producing side has left its historic role as customer service orientated and now turned into profit-only speculators. The buy-side contraction has turned into a massive party of 4 with models built for much smaller structures. That is our all-in-all-out industry today. Once you mentally prepare for the swings, you will start to recognize the many opportunities that become available.

The market finished limit up on Friday after a straight down week. On Thursday, we started seeing the forward sale community showing up, which was even more aggressive on Friday. The key takeaway from the new buy interest is that prices have fallen enough to show value. That also means that the cycle isn’t over but just hit a pause. Between the constant demand, the 30-day inventory rule, and a $375 drop, one would have expected a bottom at some point. Was an 8 session down cycle enough? That is too hard to gauge, but this massive volatility could signal a market trying to find a balance. That doesn’t indicate the top is in, but if you’re long at $1,300, you could be sitting around for some time waiting to scratch it.

Let’s Get Technical:
With all the gaps above the market, any positive trade on Monday should be used to buy futures. Those stops are prominent and noticeable. With a 32% RSI, the spec trade is up. The technical focus is still on the 1059 fib area, which could be where the market finds some trade. A return to the 963 area would indicate a long cold summer ahead.

Weekly Round-Up:
At $1,000, we can comfortably say that those buying it are either doing a forward price for a customer, need it today, or enjoys speculating. I keep saying that over $1,000 is unsustainable, and these levels aren’t a norm and will continue to fail. That said, there might be a day that it will indicate a value. As for Monday morning, it is cheap.

Open Interest and Commitment of Traders

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

https://www.cftc.gov/dea/futures/other_lf.htm

24 Jan 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: The Correction Has Begun

The Correction Has Begun

Typically, a corrective move is easy to project, but there will always be tension in making that call after last year. There is always the fear of an implosion. Last week, we saw the slowness in the cash market carrying over to the futures market. Numerous factors are weighing on the market today, as mentioned before:

The high concentration of bulls out there.
The makeup of the home buyers is getting too speculative.
The fact that mortgages are up a half-point already and going higher.

All this must be managed when ship times are weeks out and late. Most of the trade took a step back last, allowing the algo to press the futures market.

I hate to repeat it, but we are “all in or all out” regardless of any inventory management model. Today it is all out. The change will come with a futures market showing value or the buying cycle starting up again. There is a lot of pressure today in the futures, but none in cash. With another buy coming, the mills will probably trade around this area for a while. That will illuminate the futures discount at some point. Until then, the algo is in charge.

Let’s Get Technical:

The key focus area is 1,059.95. The 38% retracement of this last move started on November 1. In March, the technical picture took a negative turn this week, breaking out of a channel that began November 1. The bottom of the channel came in at 1,226 last week. The channel is 1,421 to 1,226. The market should rebound to that area on the following buy round, but the significance is that the $1,500 measurements could be out of the game now. A failure of a long-term channel in lumber has indicated a topping market. The technical read is NOT calling a top but has been a good indicator of upside limits.

There is a good pocket of noise in the $1,125 area. Between the discount and that support area, we will see if it slows the algo.

Weekly Round-Up:

The put premiums have exploded; this is where you start to lift 20% of your hedges. That quick increase in premiums also indicates a market that could be blowing off to the downside. The initial read is a market correcting, and with the algo trading, it could end lower than it should be. It also shows that overall volatility is working itself back towards a lumber norm. We’ve been defining a “marketplace” or what we previously called a trading range once the market finds an actual value. Anything over $1,000 is unsustainable but real with the lack of supply. Transportation will continue as a driver for a few months. A off the radar support mechanism is the spread. There is a growing crowd into the March-May spread on the short side. Without a fund roll, that could lead to a buy round in futures.

It is a long way back from a $1338 high. Let’s see how the market acts by midweek.

Open Interest and Commitment of Traders

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

23 LUMBER & WOOD PULP OPTIONS 23 Side 01 2022 DAILY INFORMATION BULLETIN – CME Group, Inc.

LUMBER & WOOD PULP OPTIONS 2022 DAILY INFORMATION BULLETIN – http://www.cmegroup.com/dailybulletin

https://www.cftc.gov/dea/futures/other_lf.htm

CFTC Commitments of Traders Long Report – Other (Combined)

This is the viewable version of the most recent release of the Other disaggregated long form futures only commitments report.

www.cftc.gov

About The Leonard Report

The Leonard Lumber Report is a new 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.

Before You Go…

What’s Driving the Grain Markets Heading into 2022? The 2021 U.S. grain crop has the potential to be one of the largest on record. Where did all the yield come from, what areas were the hardest hit, and why on God’s green earth are grain prices still so high? Watch here or click the video icon below:

18 Jan 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: 2022 Rundown So Far

Welcome to the 2022 lumber market. A place no one wants to be, but all keep showing up. Here’s a brief rundown:

The futures market was up over $100 again — The run has been relentless and unforgiving, and it’s hard to find the endpoint. Recently, 4 out of 5 of those in the lumber industry think the market is going higher. Half of those are not long. So why so bullish? The two key factors are transportation and demand. We will look at each side to see if that endpoint can be projected.

Many are looking for the typical first-quarter shipping issues where supplies are bought but can’t ship. That causes an artificial secondary market where the trader is forced to buy anything he can get his hands on from anyone. Here we see a jump in truck orders to “fill in.” This time, trucking availability has been restricted, creating general chaos throughout North America. The fill-in mechanism has broken down, forcing the trader to buy a car for further out shipment regardless of price. This has extended order files at the mills when they typically shrink. It also has pushed prices to the next level.

The bigger surprise coming into 2022 was the amount of demand that continues to create itself. Usually, we could foresee a push coming from the numerous jobs that get bid and rebid. Today most are surprised at the amount of new business that shows up daily. A lot of it is long-term and not close to starting, but it has changed the psyche of the trade and added another level to the already pressured trader. That same trader who can’t buy enough was only yesterday told not to buy a stick. That chase is also pushing prices to the next level.

Let’s Get Technical:

So, what is the next level? On the technical side, the key areas now are the gap left last year at $1,514.80 and an old Fib number of $1,518.30. There is room to get there with a weekly RSI at 75%. Each month is at a new high, and there aren’t any calcs from here up. We know that recently, a market spike has had a corrective pullback. I’m not that confident in a pullback with 3 out of 5 willing to “buy the pullback,” but that has been the trend.

Weekly Round-Up:

The market is back at unsustainable levels. And why do I say that? Because we can only build so many houses, and we do not have the labor to push actual starts to 1.7 or 1.8. At $1,200, there is enough wood flowing to keep a 1.6 pace at least. The market goes to $1,500 or more because there is a significant gap in the chain. Logistic problems have bottled up the flow of needed lumber, and those logistic issues are not going away anytime soon.

Open Interest and Commitment of Traders

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

https://www.cftc.gov/dea/futures/other_lf.htm

About The Leonard Report

Before You Go…

The 2021 U.S. grain crop has the potential to be one of the largest on record. Where did all the yield come from, what areas were the hardest hit, and why on God’s green earth are grain prices still so high?

12 Jan 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: January 10

It’s hard to believe that this market has reentered the hyperbole dynamic we saw last year when the market lacked any restraint in upward pricing. The market bottomed on November 2nd at $606 and has gone straight up since. On Friday, the March contract made a new high of $1,250. That is a run of over 100% during the holidays. So, what are the issues causing these spikes? First is the massive contraction of this industry, creating a buy pattern that is out of balance. There are fewer players in the pipeline, making it consistently tight. The other is the new two-week to 30-day pricing that keeps everyone in the market almost daily. A quick summary of today’s dynamic is that when demand is good, there is a constant need to buy, and when demand slows, there is no need to buy under the current model. We started with the latter this time.

The need to buy throughout the 3rd quarter dropped nearly 60%. The new model of only buying when needed and only buying an item that will ship caught the market short. The previous models always had a buying program in place as prices fell, and these guys don’t. If the market slowly turns, there should be enough inventory at the mill side to keep costs balanced. As we saw in November, the slowing of production and shipment issues caused a bottleneck overnight. The market now needs to settle to ease the pressure on prices.

Today, the issue in front of the industry is that they bought great at $700 then added to the pile at $1,000 but are still averaged well. The next time they step up to the trough price will be $1,200, which is off their charts for breakeven.

Let’s Get Technical:

This type of market doesn’t relate well to momentum indicators. That said, March made a new contract high at $1,250 with an RSI of 76.70%. There is a lot of room to the upside. The math keeps bringing the value (volume) areas into focus. The two areas are $1,250 and $1,550. A good indicator on the last run was the Fib extensions. Today the 1.38% move in March is $1497. The technicals are building for a push to that level, and there isn’t much pushback from the trade. It will take a lot of energy to get there, so a pullback in some fashion would be efficient at this point of the cycle.

Weekly Round-Up:

You heard it here first… Because of global economics, if this market goes up to the $1,500 level, it will take out the historic highs, and the momentum build-up will be too great to cool. So, there should be minor issues out there of prices going higher. If you asked us if we would buy it today, we’d say, “I wouldn’t buy it with all of Doug’s money.” You can’t discount the ease of producing this commodity. There is no fundamental cause for this commodity to be over $1,000, and we just have an incredibly inefficient marketplace today.

Open Interest and Commitment of Traders

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

https://www.cftc.gov/dea/futures/deacmesf.htm

About The Leonard Report

Before You Go…

05 Jan 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: 2022 Outlook

What a year. The housing industry plowed through 2021 with record disruptions and record sales. Once a pipeline issue was resolved, another would pop up. We are coming into 2022 with a tight supply and high demand for this commodity. Big dollars continue to flow into the economy, and now a house has reappeared as a valuable asset. There is also roaring inflation which is a double-edged sword for this commodity.

The fact is the housing market is exceptional, and lumber prices are trending higher. The positives are firmly in place, while the negatives will need a dramatic economic shift to come into play. The black swan could be rates or inflation or a greater covid blitz. In any case, it would have to be dramatic. Let us dive into the key factors controlling this industry. Our gut instinct is to rehash the past, and we’ll attempt not to bring up the obvious.

2021 — Year in Review

We came into 2021 at a futures price of $870. While we saw $1,000 the year before, this was much too high for the industry. The refusal to buy put an industry, seeing increasing volume in construction, critically underbought. From there, a panic ensued, and the market went parabolic.

The biggest takeaway from 2021 is that the trade was willing to pay unheard-of prices for wood and passed along the cost. No price level slows buying, and there is no longer too high. What higher prices do is generate a greater supply at a quicker pace. When there is a disruption in the chain, prices go straight up. Today we are either in the middle of that cycle or near the end.

Many would build a plan around the “bookends” of that year’s trade in the past. This is a critical drill for the industry in 2022. The need is to create a value area. We need to look at some of the economics out there to look at the value of this commodity.

Housing starts average in 2021 was 1.586 million. The consensus is projecting a 1.6 number in 2022. That number could be far greater if there were the ability to build. As we said back in 2018, there is only so much capacity to go around. This year, many builders have chosen to scale back building plans so as not to get overextended. Others are adding numbers with lofty goals. Profitability drives their planning, and with the lack of availability still present, profits will stay high.

Where should value sit at 1.6 million starts?

The cost of production is skyrocketing in this industry as in all the rest. The last report showed wages up 9.2%. Yes, that is correct. That means the person who changes the oil in the logger’s truck to the people who do the final cleaning on the home before closing makes about 10% more. And that is if you can find a person to hire.

In the United States, the average monthly job offerings number is around 6 million — The December 1st number was 11 million. The stat that shows the mood of labor is the “quit” rate. This is usually a sub 1% number, and it was a whopping 3% in November. 3% of workings are quitting. These numbers are unsustainable, but many of these costs will not come off.

The best indicator today of the economic issue is the current inflation rate, and in November, it recorded 6.8% with an upward trajectory.

All this is a result of flooding the system with cash. That is flooding a system that was already building strength, and that was not the case in 2009 when the economy was headed lower. We must remember that many funds are circulating in a small economic space today. At this point, it will have to inflate itself out of the problem, which will end the housing run.

We talked earlier this year about how the housing market reacts to a cash-infused accelerating economy. With a better economy, expectations were for the first-time homebuyers to jump into the market after the “lost decade.” We have seen that increase, but more than expected went to the multi-sector. Under these dynamics, an increase in rates will not cause a slowdown in home buying. The norm has been about 38% of first-timers buying new homes, which is now closer to 20%. The troubling statistic is that the 38% group are investors. We do not need to review what happened the last time it was that high.

Projection:

Usually, most outlooks are a counter-trend analysis. Today we see only roses. This industry is highly complicated because of the various amounts of input at all levels. One factor could be bullish at one point and bearish at another. Today, we have numerous positive inputs that will lead to higher prices. At the same time, those factors have a shelf life. The tightness factors are slowing. Last year once those factors were finished, others crept into the equation. The next correction will indicate if that repeats or not. In the meantime, expect the 2021 swings again. It will also look remarkably familiar to the old-time seasonals that would make a top in the first quarter, do the sell in May and go away for the summer, followed by the fall buy starting the cycle all over again.

2022 will show owning lumber products will be a sound investment. Also, owning some type of downside risk management will soften the blow of the wide swings, especially when it is down. It is no longer a “time the buy” market; it is an opportunistic buy market.

About The Leonard Report

Before You Go…

27 Dec 2021

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: A Quiet Holiday-Shortened Week

It was a quiet holiday-shortened week with the roll being the feature. The market broke $100 and rallied back $60 by the end of the session Thursday. All said the weakness in the market was only via futures, and the cash market held steady or gained for the week.

The Christmas holiday keeps giving. Next week there are more holidays to contend with — that’s why we saw the big push before the Christmas week. The question is if the push was sufficient for a while or not. Surprisingly, the cash market demand remained in place last week, so this thing could be off to the races again once the holidays are over. It looks like the aggressive cash buying is to keep the flow going. That will start to ease at some point, but it’s a positive for today.

Let’s Get Technical:

To keep it simple, the market left a gap last week between 990.20 and 979.30. With another quiet week in front of us, we would look for a test of that area. The one caveat is that lumber is famous for leaving a gap partially filled. If that is the case, the 61.70% RSI gives the market a lot of room to go back to the $1,200 area. There are two possibilities next week. Either it back and fills the gap and then trades sideways, or it off to the races dragging cash up with it.

Weekly Round-Up:

The entire market psyche is one of a trade that is range-bound and manageable. This one isn’t ready for that, and it feels like setting itself up for another run-up. Cash is still king but hedging up here is a must.

Open Interest and Commitment of Traders:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

https://www.cftc.gov/dea/futures/other_lf.htm

About The Leonard Report

Before You Go…

20 Dec 2021

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: The Three “C’s” of the Industry

Introducing the Three “C’s” of the Industry:

The best way to recap the market is to look at its tone. To sum it up, we will introduce the 3 “C’s” or confusion, congestion, and consternation. We’ve heard repeatedly, “how could this have happened so fast?” The trade was not looking for an early start to the yearend run. It also believed that there was enough supply. That proved to be incorrect. Most of the supply issues are related to the congestion at transportation points caused by COVID and weather. Things are fluid but at a pace that allows shipping to stay fluid. That is not at a pace to fill in the needs.

This leads us to the third “C,” or consternation. Concern and anxiety about future wood deliveries have trickled back into the marketplace. All have been caught in that nightmare this year and the nightmare that followed. Most are now working towards not being there again in 2022. So, we are ending the year with a more aggressive buy pattern than usual at a time when things are moving slow.

The issue plaguing this industry is its overall weakness in defining value. At $600, 50% of the industry went hand to mouth. At $900, 80% of the industry is hand to mouth. There is no investment in between. The buy-side has to scale into the market as it falls, and that will take the volatility out of the market. Waiting for the bottom is not a business strategy. We think we are seeing more of that today, but after the fact. When everyone owns $1,200, it will be a long way down again. This commodity fits well between $650 and $750.

Let’s Get Technical:

There is a lot of noise between here and 1,000 in January. Trying to gauge the trend during the holidays is fruitless. We’ll say that January futures were up $20 for the week, but the RSI fell 13%. The market is technically very friendly, but trading during the quiet holidays with some big gaps below takes some enthusiasm away from the long side. The Fibonacci points below could be the range to finish out the year:

38% 929.80

50% 1079.00

61.8% 1228.20

Weekly Round-Up:

This push higher had a lot of energy, and in this industry, the earlier the energy, the quicker the end. We think this market needs to cool some for the holidays, but we, including Rick Santelli, Kramer, the Fed, and everyone else, have never been here before. Today the consumer is accepting higher prices as the norm. There isn’t any pushback; builders are paying up, multifamily guys are paying up, homebuyers are paying up. Next year, we have no actual data to track for possible outcomes. Buying futures here could be the best trade of 2022.

Open Interest:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

10 Dec 2021

Agriculture, Corn, Cotton, Lumber Walter Lis 0 comment

AG MARKET UPDATE: DECEMBER 9

This week, corn had a good rally following a couple of big down days last week. The December USDA report was released on Thursday with minimal changes and differences between the numbers and pre-report estimates. World stocks were slightly higher than pre-report estimates at 305.45 million metric tons (304.47 MMT estimate) and marginally higher US stocks. The USDA did not make any adjustments to the South American crop estimates as they remain patient; we should expect next month to see a change. Continue to keep an eye on SA weather as any continued problems could play out in the market heading into the holidays.

CHART1

Via Barchart

Soybeans, like corn, saw a modest bounce following a couple of bad days last week. The expectation of a bearish report proved incorrect as the USDA left the stock numbers unchanged. The exports seem to have been slowing down and remain well short of the Phase 1 deal with China, so we could expect to see the export numbers lowered and ending stocks raised if there is no strong buying into the end of the year. All in all, the report lacked any market-moving fireworks.

CHART2

Via Barchart

Dow Jones

The Dow had a strong week bouncing back from its dip as there were plenty of buyers buying the dip. As fear of the Omicron variant relaxes and positive news on the vaccine fighting this strain, this cycle of the variant worry may have already hit and bounced back in the market. Many analystsare calling for a rally into the end of the year with many firms releasing their top picks for 2022. The CPI numbers will be released at the end of the week and will play out in the market on Friday.

Wheat

Wheat prices have been falling the last week and continued falling after the report. Australia and Canada had larger production than expected. Another important development specific to wheat will be the tensions between Ukraine and Russia, as any escalation would cause problems for wheat exports from Ukraine.

Podcast

For the past year, commodity prices have perpetually soared and continue to trend higher. We’re diving into the fertilizer forecast with a unique guest, Billy Dale Strader, a branch manager for Helena Agri-Enterprises in Russellville, KY., who is truly at the epicenter of the rising fertilizer prices.

Billy Dale planted his agriculture roots on his family-owned farm and has managed regional seed and chemical sales at Helena for the past decade. In this week’s pod, we tackle the big question for farmers and ultimately end-users — is the impact of higher-priced inputs, like seeds, chemicals, and fertilizer, on the supply and demand for the major U.S. crops? Listen or watch to find out!

PRICES-120921

Via Barchart.com

29 Nov 2021

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

THE LEONARD LUMBER REPORT: Futures Were Off $35.70 for the Week

Futures Were Off $35.70 for the Week

The weeks are starting to look the same. Each one has numerous undefined potential threats. Unlike most commodities, this industry has so many working parts that it is hard to rank them from least to most. Let’s look at a few.

The futures market continues to act top heavy every time it breaks through the $800 mark. A combination of speculative profit-taking and basis trades weigh on the run. Most of last week saw a positive market as the BC shipping issues grew. But the COVID talk on Friday changed the focus from worries of undersupplied to concerns of being oversupplied. Unlike most other commodities, housing is affected more by stock market moves, so Friday was tough.

The Facts are in Front of Us

The facts in front of us are that business is excellent, but shipping has slowed. What we are having an issue with is the value of the commodity. If the marketplace stays at 1.6 and shipping remains at a slower pace, then most would agree that the high end of the cash trade is around the $700 mark, and with a typical $100 premium, the futures will be sitting at $800. If supply starts to move freely, cash could rest around $550 and futures closer to $600. This is a fair analysis and would challenge others to set it up differently.

The Sleeper Out There is the Industry’s Psyche

In the futures market, 70% of the industry was bearish back at $500. Today 80 to 90% are bearish at $800. That big negative push keeps the market underbought. Monday, the focus will be on any potential COVID disruptions. Tuesday, we should be back to transportation issues.

Let’s Get Technical:

The futures market is forming a volume area in the mid $ 700’s. If the market starts to rerun upside, that volume area measures up to the 38% retracement point of $924.85. If the market can get to the 38% mark — a good enough base was built, and the futures are on their way to the 61% mark of $1,225. That should be food for thought when developing a basis or general hedging strategy. Using calls would be prudent. On the other side, generally, if a market builds a volume area without a follow-through push, it is a very defined top to focus on. The overall structure of the recent trade in both cash and futures leads me to believe that the chart pattern is trying to build the top end of the trading range.

Weekly Round-Up:

The smartest strategy for those who need a product is to stay in front of it. Owning enough wood or having a derivative positioned for a run-up will keep you out of the middle of the noise. There is no way to navigate the issues thrown at us daily. The only way is to be proactive for those who like all the noise trade the spread. It’s a good buy -20 and a good sell +20. What I do see happening is that those in the middle will have a much harder time staying out of those whips back and forth.

Open Interest and Commitment of Traders

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

https://www.cftc.gov/dea/futures/other_lf.htm

About The Leonard Report

Before You Go…

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Category: Lumber

The Leonard Lumber Report: Better Trading In Futures This Week

The Leonard Lumber Report: Looking for Tempered and Defined Market

The Leonard Lumber Report: The Correction Has Begun

The Leonard Lumber Report: 2022 Rundown So Far

The Leonard Lumber Report: January 10

The Leonard Lumber Report: 2022 Outlook

The Leonard Lumber Report: A Quiet Holiday-Shortened Week

The Leonard Lumber Report: The Three “C’s” of the Industry

AG MARKET UPDATE: DECEMBER 9

THE LEONARD LUMBER REPORT: Futures Were Off $35.70 for the Week

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