LEONARD LUMBER REPORT: “If you got long each time a rumor was sent out, you would have been buying the highs and exiting on a new low.”

“If you got long each time a rumor was sent out, you would have been buying the highs and exiting on a new low.” What a great observation. The news that a mill would operate for 4 days and curtail production sent the futures market sharply higher on Friday. To put things in perspective, considering all the positive spins last week, the November futures closed down $1.50. Today, closing or curbing production is an extreme move. It comes after the mills fill up the K-Mart parking lots, expand the vendor management programs, and establish unorthodox reload programs. In other words, when they have too much wood. This process is a slow chipping away of the excesses. I’ll be the first one to claim being way too early in the call for par. I’m worried demand is slipping, making the decreases a wash.

Another silent market killer is the fact that JIT has changed dramatically. There isn’t a day that the cash guys aren’t in the market. They continue to build long-term inventories, which is the opposite of JIT. The disciplined cash buyer has been the employee of the year for the last two years. When they buy it is at lower levels. That needs to change for the market to shift.

The rate cut will help the psychology of the market. It will be positive at some point in the months to come. For today, the industry wants a rally to hedge. The funds adding shorts can help with a pop. 

The Technical Read:

The biggest takeaway and risk I see today via the technical read is that November futures were at $712.00 on August 1st. We talked about how futures were at $418 in July of 2024. Well, August 1st. was only 30 sessions ago. That is a $200 swing in a flat market. There is no clever way to project the market. The simple answer is buying the discounts or selling premiums in futures, and then you turn off the emails. Today, the technical read is trying to indicate a slow bottom forming. We have been here before, only to see a sharp spike followed by new lows.

Under a 200-plus swing environment, there is no reason not to buy the cash items you need that are hitting new lows. There is no reason not to hedge at a significant premium. This is no longer a blocking and tackling drill. It is full pads, two-a-days. It’s all about discipline. It’s all about market parameters. It’s all about the plan.

Note: We were looking for a catastrophic September close. What if it spikes?