LEONARD LUMBER REPORT: 50 bucks on a fire

50 bucks on a fire. That is what March rallied last week on news of the mill fire. The reduction in supply over the last month has been a worry for the industry. The fire served as the catalyst for all the purchasing we saw. We come into the week with a watchful eye on the pace of cash buying. This run has been entirely cash driven. It will need to see follow-through to help the already premium futures market. The issue here is the time of the year. We have been pretty committed to the seasonals for a good 14 months now, and have to deal with a winter event. The below-freezing temps will stop the process. Any signs of a slowdown in cash will send the longs in futures to the sidelines. It will also slow the spec community from continuing the upward pressure. This could be short-lived if the pipeline is as thin as is getting reported. So there are two questions to be asked:

• Has the recent buying filled the hole?

• Can the speculators pick up their pace to offset a flat cash trade?

March open interest is coming off as traders take profits. With 7000 industry longs, there is still a large chunk to take profits. I hope they don’t head to the exits at once.

Technical:

There are 7000 industry longs and 6300 fund shorts. Fundamentals favor the longs, but the size of both will definitely bring in volatility. For the first time in a while, futures are looking top-heavy. At 75.30% RSI, there is more room to the upside. The issue is that the quick run up extends the oscillators quicker than the RSI. 2025 March had the same technical read. It gave up a little going into the end of Jan and then took off to new highs. A continuation pattern will show up on Tuesday if it is still in place.

We are not reversing out of the uptrend. We expect some type of correction.